11 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


COMMERCIAL  LAW  CASES 
VOLUME  ONE 


PERRIN  AND  BABB 


COMMERCIAL    LAW 
CASES 


BY 


HAROLD    L.    PERRIN,    LL.M.,  Ph.D. 

Professor  and  Head  of  the  Department  of  Law  of  the  College  of 
Business  Administration,  and  the  College  of  Secre- 
tarial Science,  Boston  University 


AND 


HUGH   W.    BABB,  B.A.  (Oxon.),   LL.B. 

Assistant  Professor  of  Law  at  the  College  of  Business  Administration, 
Boston  University 


IN    TWO    VOLUMES 

VOLUME  ONE 

CONTRACTS  —  SALES 
AGENCY 


NEW  xair  YORK 
GEORGE  H.  DORAN  COMPANY 


p  m^ 


CL 


COPYRIGHT,    1 92 1, 
BY  GEORGE    H.   DORAN   COMPANY 


PRINTED   IN  THE    UNITED  STATES   OF  AMERICA 


^  PREFACE 

The  object  of  this  book  is  to  furnish  material  which,  in  the 
hands  of  a  competent  instructor,  shall  be  adequate  for  a  two 
years'  course  in  commercial  law  in  institutions  of  collegiate  rank. 
To  this  end,  the  authors  have  attempted  to  combine  the  advan- 
tages of  the  text  book  and  case  systems,  and  have  attempted 
further  to  eliminate  some  of  the  disadvantages  of  each.  The  text 
presents  to  the  student  the  fundamental  principles  of  each  sub- 
ject in  such  form  that  he  may  appreciate  the  relation  of  the  cases 
to  each  other  and  to  the  whole;  the  cases  have  been  so  sum- 
marized and  abstracted  as  to  reduce  to  a  minimum  the  tedious 
verbiage  upon  which  the  student  ordinarily  wastes  time. 

In  order  to  accomplish  this  result  within  a  limited  number  of 
pages,  the  authors  have  been  obliged  to  assume  competent  instruc- 
tion, or,  in  its  absence,  such  general  familiarity  with  the  subject 
matter  by  the  student  that  he  can  appreciate  what  subjects  have 
been  exhaustively  covered  and  what  subjects  are  less  completely 
represented.  While  the  main  topics  in  every  branch  treated  have 
been  at  least  touched  upon,  it  has  been  necessary  to  confine  within 
the  scope  of  two  volumes  material  which  in  the  ordinary  law 
school  instruction  requires  at  least  twelve.  Obviously,  every 
branch  of  every  subject  cannot  be  completely  set  forth.  With 
this  difficulty  in  view,  the  authors  have  not  lost  sight  of  the  main 
elements  and  fundamental  principles,  yet  have  been  obliged  to 
treat  conflicts  in  minor  rules  as  of  secondary  importance.  More 
space  and  minuteness  of  detail  have  been  given  to  the  discussion 
of  the  law  of  contracts  than  to  any  other  branch,  since  experience 
shows  that  a  proportionately  longer  period  devoted  to  the  first  and 
fundamental  subject  in  commercial  law  results  in  a  quicker  and 
surer  grasp  of  the  derivative  principles  of  subjects  subsequently 
treated.  The  relative  space  occupied  in  this  volume  by  the  law 
of  contracts  represents  to  the  authors'  minds  the  relative  time 
which  should  be  spent  upon  that  subject  in  any  course  on  com- 
mercial law. 

It  may  be  thought  that  a  text  purporting  to  cover  two  years* 
work  should  comprise  other  branches  of  the  law  in  addition  to 
those  here  represented :  Contracts,  Sales,  Agency,  Negotiable 
Instruments,  Partnership  and  Corporations.  In  teaching,  it  has 
become  apparent  that  far  better  results  are  reached  by  confining 


VI  PREFACE 

the  instruction  to  these  particular  subjects  with  a  few  additional 
lectures  by  the  instructor  upon  insurance,  torts,  bankruptcy,  car- 
riers and  real  property.  Students  who  have  attempted  to  study 
subjects  in  addition  to  the  six  included  in  this  text  are  almost 
invariably  found  to  have  so  broad  a  knowledge  that  it  has  no 
depth. 

While  the  primary  object  of  the  book  is,  as  has  been  said,  to 
furnish  a  text  for  institutions  of  a  certain  standing,  the  authors 
believe  tliat  its  usefulness  will  be  by  no  means  limited  to  this 
particular  field.  The  business  man  who  desires  stronger  meat  than 
the  necessarily  incomplete  works  on  commercial  law  now  in  the 
market,  will,  in  the  opinion  of  the  authors,  find  this  book  a  more 
satisfactory  diet  than  the  perusal  of  additional  texts  on  commer- 
cial law.  This  statement  is  not  intended  as  a  criticism  of  these 
other  works :  it  is  merely  a  plain  statement  of  the  fact,  apparent 
to  every  teacher,  that  it  is  impossible  to  cover  the  field  in  the 
limited  space  of  one  text  book  without  generalizing  at  the  expense 
of  the  particular  exception  in  which  the  business  man  happens  to 
be  interested.  So  far  as  this  book  goes,  it  represents  not  only 
what  the  authors  think  about  the  law,  but  the  actual  law  in  the 
particular  cases  set  forth. 

The  summaries  of  facts  are  entirely  the  work  of  the  authors. 
All  details  not  essential  to  the  particular  questions  in  issue  have 
been  eliminated,  and  facts  bearing  upon  matters  collateral  to  the 
excerpts  have  been  disregarded.  The  holding  of  the  court  has 
been  occasionally  broadened  to  indicate  the  relation  of  the  par- 
ticular case  to  the  subject  in  hand.  The  remainder  of  each  case 
is  the  judgment  of  the  court,  omitting  unnecessary  discussion.  In 
order  to  make  these  truncated  judgments  readable,  the  authors 
have  been  obliged  to  take  some  liberties  with  spelling,  quotation 
marks,  marks  of  omission,  and  punctuation  generally.  Omissions 
have  not  usually  been  indicated,  and  only  quotations  from  text 
writers  have  been  properly  signified.  This  course  the  authors  be- 
lieve to  be  justified  in  the  interest  of  legibility  and  concentration. 

A  few  words  may  be  in  order  concerning  the  use  of  the  book 
in  college  classes :  The  authors  believe  that  the  best  results  will 
be  obtained  by  assigning  the  text  and  cases  for  reading  by  the 
student  before  coming  to  class.  The  text  material  should  be 
thoroughly  learned  by  the  student  in  order  that  he  may  be  fa- 
miliar with  the  subject  matter  when  the  instructor  lectures  upon 
it.  The  instructor  may  then  analyze  the  facts  and  comment  on 
the  facts  and  the  law  contained  in  the  cases,  giving  additional 
examples  and  illustrations  of  the  rules  involved,  and  amplifying 
the  text  to  any  extent  that  he  considers  advisable.  It  is  too  often 
true  that  a  text  book  leaves  little  for  the  instructor  to  add  to  the 


PREFACE  Vll 

material  there  presented,  and  the  course  thereby  becomes  dry 
and  uninteresting.  This  difficulty  the  authors  have  had  in  mind, 
and  have  purposely  left  large  scope  for  the  instructor's  individual 
knowledge  and  point  of  view. 

It  may  be  considered  that  the  book  appears  too  large  for 
classes  which  have  a  limited  time  at  their  disposal.  This  difficulty 
is  more  apparent  than  real,  as  it  is  feasible  for  the  instructor  to 
skip  cases  at  will  and  thereby  choose  for  himself  only  the  more 
important  ones.  Furthermore,  it  is  possible  and  very  practicable 
to  require  no  reading  of  the  opinion  of  the  court  in  many  cases. 
While  the  book  has  been  in  preparation,  the  authors  have  been 
furnishing  their  classes  with  mimeographed  statements  of  facts 
and  holdings,  with  no  opinion  appended.  This  system  has  worked 
well  and  can  be  used  to  advantage  even  with  the  book  in  complete 
form  by  omitting  the  reading  of  the  opinion.  The  course  may  be 
much  shortened  by  the  elimination  of  this  requirement,  and  at  the 
same  time  those  students  who  desire  to  do  additional  work  will 
have  the  material  at  hand. 

The  acknowledgment  of  the  authors  is  due  to  Miss  Bessie  N. 
Page,  instructor  in  History  and  Law  in  the  College  of  Secretarial 
Science  at  Boston  University,  for  her  careful  comparison  of  the 
text  and  for  valuable  suggestions  concerning  the  subject  matter. 

H.  L.  P. 
Boston,  H.  W.  B. 

September  i,  igsi. 


Page 

Ivine 

404 

14 

405 

9 

408 

5 

423 

30 

448 

36 

457 

41 

461 

7 

478 

24 

470 

32 

480 

31 

480 

33 

489 

12 

492 

21 

503 

10 

TABLE  OF  ERRATA 

VOLUME  ONE 

Insert  "his"  before  "employment" 

Delete  comma  before  parenthesis 

Should  read  "Eiability  of  Joint  Principals" 

"Plaintiff's,"  not  "plaintiffs'  " 

"Sub  agent,"  not  "sub-agent" 

"Defendant,"  not  "defendants" 

"Plaintiff,"  not  "plaintiffs" 

Should  read,  "it  is  not  to  be  applied",  etc. 

Should  read,  '  qni  ftxcit  per  aliiim  facit  per  se 

"Plaintiffs',"  not  "plaintiff's" 

"plaintiffs"  instead  of  "defendants" 

Lloyd's 

"Applying  this  principle",  etc. 

''Plaintiffs',"  not  "plaintiff's" 


TABLE  OF  CONTENTS 


VOLUME  ONE 

FAGB 

PREFACE  V 

INTRODUCTION i 

COMMEROAL   LaW I 

Legal  Rights i 

Sources  of  Law 2 

common  law 2 

EQUITY 3 

STATUTE    LAW 4 

OTHER  SOURCES 4 

CANON  LAW 4 

CIVIL  LAW      .,.,.>: .  4 

THE  LAW  MERCHANT S 

Jurisdiction S 

STATE    COURTS 6 

FEDERAL  COURTS 7 

CHAPTER  I:     Formation  of  Contracts      ......  9 

1.  Express,  Implied  and  Quasi  Contracts     ......  10 

2.  Implied  Contracts ii 

3.  Implied  Contracts  :    Necessity  of  Privity  between  Parties  12 

4.  Executory  and  Executed  Contracts 13 

5.  Legal  and  Moral  Obligation 13 

I.  Agreement 15 

A.  Offers 

1.  Offer  and  Acceptance  by  Conduct 16 

2.  Communication  of   Offer:    Necessity  of   Knowledge   of 

Offeree  of   Offer l6 

3.  Advertisements  Distinguished  from  Offers 17 

4.  Uncompleted  Negotiations 18 

5.  Indications  of  Intention I9 

6.  Vague  Agreements 20 

7.  Notice  of    Revocation 21 

ix 


TABLE    OF    CONTENTS 

PAGE 

8.  Revocation  by  Death  of  Offerer 22 

9.  Sealed  Offers.     (Majority  Rule) 23 

10.     Revocation  of  Offer  to  Public  in  Manner  of  Offer    ,     .  23 

ir.    Revocation  by  Lapse  of  Time 24 

B.  Acceptance 

1.  Communication  of  Acceptance 25 

2.  Acceptance  by  Act 26 

3.  When  Acceptance  Takes  Place 28 

4.  Acceptance  to  Place  Specified 29 

5.  Acceptance  in  Manner  Implied 30 

6.  Necessity  of  Unconditional  Acceptance 31 

7.  Termination  of  Offer  by  Counter-Offer 32 

II.  Form  of  Contr.\cts 33 

A.  Scaled  Instruments 

1.  Nature  of  a  Seal 36 

2.  Delivery 37 

3.  Estoppel 37 

4.  Merger  of  Prior  Simple  Contract 38 

5.  Nature  of  Consideration  Usually  Immaterial  at  Law    .     .  39 

6.  Illegality  or  Immorality  of  Consideration  of  Sealed  Con- 

tract        40 

7.  Nature  of  Consideration  Material  in  Equity     ....  41 

B.  Statute  of  Frauds 

1.  Promise  by  Executor  or  Administrator 42 

2.  Promise  to  Answer  for  Debt  of  Another 43 

3.  Promise  to  Debtor  to  Answer  for  His  Debt  ....  44 

4.  Contract  Made  on  Credit  of  Promisor 45 

5.  Extinction  of  Original  Debt 46 

6.  Promise  for  Benefit  Received  by  Promisor  from  Creditor  47 

7.  Promise  for  Benefit  Received  by  Promisor  from  Debtor  .  48 

8.  Promise  upon  Consideration  of  Marriage 49 

9.  Contracts  for  Sale  of  Interest  in  Land.   (Majority  Rule)  50 

10.  Contracts  for  Sale  of  Interest  in  Land.    (Massachusetts 

Rule) 51 

11.  Contracts  not  to  be  Performed  within  a  Year     ...  52 

12.  Contracts   which   May  be  Performed  within  a  Year  by 

Death 52 

13.  Nature  of  Memorandum  Required 54 

14.  Nature  of  Memorandum  Required 55 

15.  Signature  of  Memorandum  by  Party  to  be  Charged    .     .  55 

16.  Effect  of  Non-Compliance  with  the  Statute     .... 


TABLE   OF    CONTENTS  XI 

PAGE 

III.  Consideration       57 

1.  Nature   of   Consideration 59 

2.  Good   and  Valuable  Consideration 60 

3.  Consideration   in    Sealed   Instruments 61 

4.  Exchange  of  Even  Values 61 

5.  Adequacy  of  Consideration  in  Equity 63 

6.  Forbearance 63 

7.  Part  Payment  of  Debt  not  yet  Due  as  Consideration     .  64 

8.  Part  Payment :    Effect  of  Voucher  Check 66 

9.  Part  Payment  Accompanied  by  Other  Benefit  or  Detri- 

ment        68 

10.  Compromise  of  Amount  Due 68 

11.  Compositions  with  Creditors 69 

12.  Doing  What  One  is  Bound  to  Do 70 

13.  Promise  of  Additional  Compensation.    (General  Rule)    .  71 

14.  Promise  of  Additional  Compensation.  (Conflicting  Rule)  72 

15.  Additional  Promise  by  Third  Party 7/ 

16.  Conditional  Consideration 75 

17.  Past   Consideration 76 

18.  Moral  Obligation  as  Past  Consideration yy 

19.  Past  Consideration  in  Case  of  Debt  Discharged  by  Law  78 

20.  Consideration   Part  Past  and  Part  Present      ....  80 

21.  Privity  to  Consideration.  (Majority  Rule) 81 

22.  Privity  to  Consideration.  (Minority  Rule) 82 

23.  Subscriptions SLj 

IV.  Capacity  of  Parties 85 

A.  Contracts  of  Infants. 

1.  Contracts  of  Infants  in  General 86 

2.  Contracts  for  Necessaries      .     .         87 

3.  Executory  Contracts  for  Necessaries 88 

4.  Money  as  a  Necessary 8g 

5.  Contracts  which  an  Infant  may  be  Compelled  by  Law  to 

Perform 90 

6.  Contracts  of  which  an  Infant  has  Enjoyed  the  Benefit    .  91 

7.  Conditions    Under    Which    Infant   May    Rescind.      (Ma- 

jority Rule) 92 

8.  Conditions    Under    Which    Infant    May    Rescind.      (Mi- 

nority   Rule) 94 

9.  Ratification         95 

10.  Ratification  by  Lapse  of   Time 96 

11.  Ratification:    Knowledge  of  Right  of  Rescission  Imma- 

terial       97 

12.  Mere  Acknowledgment  Not  Ratification 98 

13.  Statutory  Requirement  of  Written  Ratification      ...  99 


Xll  TABLE    OF    CONTENTS 

PAGE 

14.  Appointment   of  Agent  by   Infant 100 

15.  Infant's  Liability  for  Tort  Distinguished lOi 

B.  Contracts  of  Insane  Persons. 

1.  What   Constitutes   Inability  to   Contract 102 

2.  Liability  of  Insane  Person   for  Necessaries      ....  I02 

3.  Knowledge  of  Insanity  by  Other  Party  Immaterial     .     .  104 

4.  Necessity  of  Return  of  Consideration  on  Disaffirmance. 

(Majority  Rule) 105 

5.  a.  Necessity  of   Return   of   Consideration   on   Disaffirm- 

ance.   (Minority   Rule) 106 

h.  Ratification 106 

C.  Contracts  of  Married  Women. 

1.  Common   Law    Disability 108 

2,  Contracts  Between  Husband  and  Wife 109 

V.  Reality  of  Consent no 

A.  Mistake. 

1.  No  Mistake  When  Minds  Meet 112 

2.  Failure  of  Minds  to  Meet 114 

3.  Efifect  of  Unilateral  Mistake 114 

4.  IMistake  as  to  Nature  of  Transaction 115 

5.  Mistake  as  to  Identity  of   Person 116 

6.  Mistake  as  to  Identity  of  Person 116 

7.  Mistake  as  to  Existence  of  Subject  IMatter     ....  118 

8.  Mistake  as  to  Identity  of  Subject  Matter 119 

9.  IMistake  as  to  Nature  of  Promise  Known  to  Other  Party  121 

10.  Mistake  as  to  Value  of  Subject  Matter 122 

11.  Mistake  of  Law 123 

12.  Mistake  as  to  Law  of  Another  Jurisdiction     ....  124 

B.  Misrepresentation  and  Fraud. 

1.  Innocent  Misrepresentation  in  General 126 

2.  Misrepresentation  a  Term  of  the   Contract      ....  127 

3.  Misrepresentation  a  Ground  of  Relief  in  Equity     .      .     .  129 

4.  Misrepresentation  by  One  in  Confidential  Relationship     .  130 

5.  Elements  of   Fraud 131 

6.  Promissory  Misrepresentation  of  Fact 132 

7.  Misrepresentation  of  Intention  as  Fact 133 

8.  Misrepresentation  by  Concealment 134 

9.  Knowledge  of  Falsity 135 

10.  Intention  that  Other  Parly  Act 136 

11.  Action    by    Other    Party 137 

12.  Damage          138 

13.  Effect  of   Fraud 140 


TABLE   OF    CONTENTS  Xlll 

PAGE 

C.  Duress  and  Undue  Influence. 

1.  What  Constitutes  Duress 141 

2.  Threat  of  Lawful  Act 143 

3.  Threat    of    Lawful    Imprisonment 144 

4.  Duress  of  Goods 145 

5.  Ratification  of  Contract  Obtained  by  Duress     ....  146 

6.  Undue  Influence 147 

7.  Effect  of  Undue  Influence 148 

VI.  Legality  of  Subject  Matter 151 

1.  Effect  of  Illegality 152 

2.  Agreement  to  Commit  a  Crime 153 

3.  Agreement  to  Commit  a  Private  Wrong 154 

4.  Agreement  to  Violate  Directory  Statute  not  Void     .     .  155 

5.  Agreement  to  Violate  Statute  for  Revenue  Purposes  Only 

Not  Void 156 

6.  Agreement  to  Violate  Statute :    Sunday  Contracts     .     .  157 

7.  Agreement  to  Violate  Statute :    Dealing  in  Futures     .      .  160 

8.  Agreement  to  Violate  Statute:    Bucket   Shops      ...  161 

9.  Agreement  to  Violate  Statute :    Lotteries 162 

10.  Agreement  to  Violate  Statute :    Usury 163 

11.  Agreement  Against   Public   Policy:    Influencing  Official 

Action 164 

12.  Agreement   Against    Public    Policy:     Ousting   Court   of 

Jurisdiction          166 

13.  Agreement  Against  Public  Policy:    Secret  Advantage  in 

Composition  with  Creditors 167 

14.  Agreement  Against  Public  Policy :   Secret  Advantage  in 

Composition  with  Creditors.   (Conflicting  Rule)      .     .  168 

15.  Agreement  Against  Public  Policy :    Restraint  of   Trade  i6g 

16.  Effect  of  Partial  Illegality 171 

17.  Effect  of  Partial  Illegality 171 

18.  Effect  of  Withdrawal  from  Illegal  Contract     ....  173 

19.  Agreement  in  Violation  of  the  Law  of  Another  Jurisdic- 

tion         174 

CHAPTER  II:     Operation  and  Discharge  of  Contracts  176 

I.  Parties  to  Contracts 176 

A.  Parties  Privy  to  Contract. 

1.  Necessity  of  Privity 177 

2.  Right  to  Recover  Money  Had  and  Received     ....  179 

3.  See  Cases  Under  Chapter  I,  III,  Consideration     .     .     .  179 

B.  Assignment. 

1.  In  General 180 

2.  Assignment  of  Rights  Not  Yet  in  Existence     ....  182 


XIV  TABLE    OF    CONTENTS 

PAGE 

3.  Assignment  of  Future  Wages 183 

4.  Assignment  of  Contract  Involving  Personal  Credit     .      .  184 

5.  Assignment  of   Part  of  Debt  Due 186 

6.  Form    of    Assignment 187 

7.  Rights  of  Assignee  after  Notice  to  Debtor 187 

8.  Assignee  Takes  Subject  to  Equities  against  Assignor     .  188 

9.  Rights  of  Successive  Assignees 189 

ID.     Assignment   by   Death 191 

II.    Assignment  by  Bankruptcy 192 

C.  Joint  and  Several  Contracts. 

1.  Intent  to  Make  Joint  or   Several   Contract                 .     .  193 

2.  Suit  Against  Joint  Contractors 194 

3.  Suits  on  Joint  Contracts  When  Some  of  the  Joint  Con- 

tractors  are    Outside   the   Jurisdiction 195 

4.  Release  of  One  Joint  Debtor 196 

5.  Suit  by  Joint  Contractors 197 

6.  Right    of    Joint    Contractor    to    Contribution    from    the 

Others 198 

II.  Construction  of  Contracts 199 

A.  Legal  Effect  of  Language. 

1.  Intent  of  Parties 200 

2.  Correction  of  Obvious  Mistakes 201 

3.  Efifect  of  General  Words 203 

4.  Technical  Words 204 

5.  Effect  of  Custom 205 

6.  Requisites  of  Valid  Custom .      .  207 

7.  Construction  of  Terms  in  Order  to  Give  Contract  Validity  208 

8.  Contract  to  be  Construed  Reasonably 209 

9.  Contracts   to  be   Construed  According  to  the   Construc- 

tion Placed  Upon  Them  by  the  Parties 2il 

10.  Inconsistent  Written  and  Printed  Provisions     ....  212 

11.  Terms  Implied  in  a  Contract 213 

12.  Construction  of  Contracts  as  to  Time 214 

13.  When  Time  is  the  Essence  of  the  Contract     ....  215 

14.  Time  as  the  Essence  of  the  Contract  in  Equity     .     .     .  217 

B.  Dependent  and  Independent  Terms. 

1.  In  General 218 

2.  Entire  and  Severable  Contracts 220 

3.  Instalment   Contracts         222 

4.  Tender  of  Performance  as  a  Condition  Precedent     .     .  224 

5.  Time  of  Delivery  as  Condition  Precedent 225 

6.  Effect  of  I'aiiure  to  Perform  Condition  Precedent     .      .  226 


TABLE    OF    CONTENTS  XV 

PAGE 

7.  Mutually  Dependent  Conditions 227 

8.  Conditions  Subsequent 228 

9.  Conditions  Subsequent :    See  Cases  Under  Discharge  by 

Agreement,   iii,  A,   Infra 229 

III,  Discharge  of  Contracts 229 

A.  Discharge  by  Agreement. 

1.  Waiver 231 

2.  Substitution  of  New  Contract 232 

3.  Efifect  of   Substitution  of  New  Contract      .....  233 

4.  Discharge  by  Condition  Subsequent:    Occurrence  of  Par- 

ticular  Event 235 

5.  Discharge  by  Condition  Subsequent :    Exercise  of  Option  236 

6.  Discharge  by  Condition  Subsequent :    Cancellation      .      .  22,7 

7.  Form  of  Discharge :    Contracts  under  Seal      ....  238 

8.  Form  of   Discharge :    Contracts  Within   the   Statute   of 

Frauds 239 

B.  Discharge  by  Performance. 

1.  What  Constitutes   Performance 241 

2.  Substantial    Performance 242 

3.  Quantum  Meruit 244 

4.  Quantum  Meruit:   Effect  of  Non-Compliance  with  Terms 

of  Contract 245 

5.  Negotiable    Instruments    as    Payment 247 

6.  Application  of  Payments  on  Account 248 

7.  Effect  of  Tender 249 

C.  Discharge  by  Breach. 

1.  Anticipatory  Breach 251 

2.  Damages  for  Breach  During  Course  of  Performance     .  252 

3.  Bankruptcy  as  Breach 253 

4.  Recovery  of  Penalty  for  Breach 254 

D.  Discharge  by  Impossibility. 

1.  When  Impossibility  of  Performance  Operates  as  a  Dis- 

charge          256 

2.  Impossibility  Created  by  War 258 

3.  Discharge  by  Impossibility  of  Performance  Arising  from 

Destruction  of  the   Subject  Matter 260 

4.  Discharge  by  Subsequent  Illegality 262 

E.  Discharge  by  Operation  of  Law. 

r.    Merger 264 

2.    Alteration 265 


XVI  TABLE    OF    CONTENTS 

PAGE 

3.  Death ,, 266 

4.  Bankruptcy         267 

CHAPTER  III:     Sales 269 

I.  The  Contract  of  Sale 269 

A.  The  Contract  of  Sale  in  General. 

1.  Definition 272 

2.  Sale  and  Contract  to   Sell  Distinguished 274 

3.  Necessity  of  Agreement  on  Terms  of   Sale      ....  275 

4.  What   is   Property 276 

5.  What  are  Goods 277 

6.  What  is  Price 278 

B.  Sales  Distinguished  from  Similar  Transactiofis. 

1.  License 279 

2.  Bailment  and   Conditional   Sale 280 

3.  Return  of   Identical   Goods   in   Bailment 282 

4.  Bailment  of  Goods  Mixed  with  Other  Goods     ....  283 

5.  Bailment  with  Option  to  Buy 284 

6.  Conditional  Sale 285 

7.  Pledge 287 

8.  Chattel  Mortgage 288 

9.  Barter 289 

ID.     Contract  for  Work,  Labor  and  ]\Iaterials 290 

C.  Statute  of  Frauds. 

1.  Application  in  General  to  Contracts  of  Sale     ....  293 

2.  Nature  of  Memorandum  Required 295 

3.  What  the  Alemorandum  Must  Contain 296 

4.  What  Constitutes  Acceptance  and  Receipt 298 

5.  Constructive   Acceptance  and  Receipt 300 

6.  Necessity  of  Act  Indicative  of  Acceptance  and  Receipt    .  301 

7.  Acceptance  Must  be  Under  the  Contract 302 

8.  Amount  Received  Not  Material 303 

9.  What  Constitutes  Part  Payment 304 

10.     Necessity  of  Actual  Payment 305 

II.  Warranties 306 

1.  Express  and  Implied  Warranties 307 

2.  Dealers'  Talk 308 

3.  Implied  Warranty  of  Title 310 

4.  Implied    Warranties    of    Quiet    Enjoyment   and    Against 

Incumbrances 312 

5.  Sale  by  Inspection :    Caveat  Emptor 313 


TABLE   OF    CONTENTS  XVll 

PAGE 

6.  Sale  by  Inspection :    Warranty  When  Seller  is  Manufac- 

turer       314 

7.  Sale  by  Description :  Warranty  of  Conformity  to  Descrip- 

tion         316 

8.  Sale  by  Description:    Warranty  of   Merchantability      .  317 

9.  Sale  by  Sample:   What  is  Sale  by  Sample     .      .     .      .     .  318 
ID.     Sale  by  Sample:   Warranty  of  Correspondence  to  Sample  319 

11.  Sale  by  Sample:    Warranty  of  Right  of  Inspection     .     .  320 

12.  Sale  by  Sample  :   Warranty  against  Defects  not  Apparent  321 

13.  Warranty  of   Fitness   for   Particular   Purpose      .     .     .  322 

14.  Warranty  of  Fitness :    Reason  for  the  Rule     ....  323 

15.  Warranties   Annexed  by  Usage 324 

III,  Transfer  of  Property  Between  Buyer  and  Seller    .     .     .  325 

A.  When  Title  Passes. 

1.  Intent  the   Determining  Factor r     .     .  326 

2.  To  What  Goods  Title  May  Pass 329 

3.  To  What  Goods  Title  May  Pass :    Mortgage  of  Stock  in 

Trade        330 

4.  Goods    Must   be   Ascertained   and   Appropriated   to   the 

Contract 33^ 

5.  Ascertained  Goods  Sold  by  Weight,  Measure  or  Count  332 

6.  Sale  of  Goods  from  a  Mass 333 

7.  Minority  Requirement  of  Physical  Separation    ....  335 

8.  Selection  by  Buyer  from  Mass 33^ 

9.  Efifect  of  Delivery  to  Common  Carrier 338 

10.  Efifect  of   Delivery  to   Carrier  of  Goods  Agreed  to  be 

Delivered        339 

11.  Sales  by  Auction 340 

12.  Efifect  of  Bill  of  Lading 342 

13.  Efifect  of  Invoice 343 

14.  Efifect  of  Transfer  of  Bill  of  Lading 345 

15.  Efifect  of  Transfer  of  Warehouse  Receipt 346 

B.  Risk. 

1.  Goods  at  Risk  of  Owner      ..........  348 

2.  Risk  on  Buyer  in  Conditional  Sale 349 

C.  Rights  of  Innocent  Purchaser  from  Seller  not  Having 

Title. 

1.  General  Rule .     .     .,  349 

2.  Further  Discussion  of  General  Rule 352 

3.  Who   are   Bona  Fide    Purchasers 354 

4.  Estoppel  to  Assert  Title 355 

5.  What  Raises  Estoppel 356 


XVlll  TABLE   OF    CONTENTS 

PAGE 

6.  Sale  by  Thief 358 

7.  Sale   by   Fraudulent  Vendee 359 

D.  Rules  Concernmg  Passing  of  Title  Under  Sales  Act. 

1.  General  Rules 360 

2.  Eflfect  of  Bill  of  Lading 361 

3.  Effect  of  Negotiable  Document  of  Title 362 

IV.  Rights  of  the  Parties 364 

A.  Unpaid  Vendor's  Lien. 

1.  In  General 365 

2.  Lien  on  Expiration  of  Credit 367 

3.  Effect  of  Delivery  of  Negotiable  Receipt  on  Lien     .     .  369 

4.  Lien   not   Applicable  to   Property  After   Purchaser  has 

Changed  its   Character 371 

5.  Lien  Unaffected  by  Judgment 372 

B.  Stoppage  in  Transitu. 

1.  Of  What  the  Right  Consists 373 

2.  To  What  Carriage  the  Right  Extends 373 

3.  Termination    of    Transit 375 

4.  Termination  of  Transit 376 

5.  Effect  of  Assignment  of  Bill  of  Lading 378 

6.  Right  Not  Lost  by  Wrongful  Dispossession     ....  379 

C.  Rights  Accruing  Upon  Breach  of  the  Contract. 

1.  Rights  of  Seller  in  General 381 

2.  Right  of  Resale 382 

3.  Right  to  Resell  Goods  Stopped  in  Transit 382 

4.  Right  of  Carrier  to  Resell 385 

5.  Necessity  of  Tender  before  Resale 386 

6.  When    Tender   Must   be    ]\Iade 388 

7.  Right  of  Rescission 389 

8.  Right   of   Rescission   for  Breach  of    Warranty      .      .     .  391 

9.  Right  to  Sue  for  Price 392 

ID.    Rules  for  Determination  of  Measure  of  Damages     .     .  393 

11.  Damages  in  Stock  Transactions 395 

12.  Damages  for  Breach  of  Warranty 396 

13.  Damages  for  Breach  of  Warranty 398 

14.  Specific    Performance 399 

CHAPTER  IV:     Agency 401 

I.     Relationship  of  PRI^'CII•AL  and  Agent 401 

A.  Relation  in  General. 

1.  Servants   and    Agents 404 

2.  Powers   of   Joint  Agents 407 


TABLE   OF    CONTENTS  XIX 

PAGE 

3.  Liability  of  Joint   Principals 408 

4.  Relationship    by    Agreement 409 

5.  Form   of  Authority:    Parol   Authority  to   Sign  Written 

Instrument 410 

6.  Form  of  Authority  to  Give  Sealed  Instrument     .     .      .411 

7.  Instrument  Sealed  by  Agent  in  Presence  of  Principal     .  411 

8.  Authority  of  Agent  to  Fill  Blanks  in  Sealed  Instrument  412 

B.  Ratification. 

1.  Definition 414 

2.  What  Constitutes  Ratification 415 

3.  Necessity  of  Ratification  or  Disaffirmance 416 

4.  Consideration  for   Ratification   Unnecessary      ....  418 

5.  Form  of   Ratification 419 

6.  Form  of  Ratification  of  Sealed  Contract 420 

7.  Necessity    of    Existence    of    Principal    at    Time    of    Act 

Ratified 421 

8.  Knowledge  of   Facts  Necessary  to  Ratification      .     .     .  422 

9.  Ratification   of    Entire    Contract    Necessary       ....  423 

10.  Intervening   Rights  of   Third    Parties 424 

11.  Right  of  Third  Party  to  Withdraw  before  Ratification    .  425 

12.  Ratification  of  Criminal  Act 426 

C.  Agency  by  Estoppel. 

1.  The  Idea  of  Estoppel 428 

2.  To  What  Acts  of  the  Agent  Estoppel  Extends     ,     .     .  429 

3.  Estoppel  to  Assert  Secret  Limitations 430 

4.  Necessity  of  Misleading  Third  Person  in  Order  to  Create 

Estoppel 432 

5.  Right  of  Third  Party  to  Rely  on  Apparent  Authority     .  433 

6.  Principles  of  Estoppel  Equally  Applicable  to  General  and 

Special    Agents 434 

D.  Agency  by  Necessity. 

1.  What  Constitutes  Agency  by  Necessity 435 

2.  What  is  Necessity 437 

3.  Agency  by  Necessity  of  Wife 438 

II.  Operation  of  Agency 440 

A.  Mutual  Rights  and  Duties  of  Principal  and  Agent. 

1.  Duty  of  Principal  to  Compensate  and  Indemnify  Agent  442 

2.  Rights  of   Servant  Wrongfully  Discharged      ....  443 

3.  Duty  of  Care  for  Safety  of  Employees 444 

4.  Duty  of  Agent  to  Follow  Instructions 446 

5.  Duty  to  Exercise  Good  Faith 447 


XX  -  TABLE    OF    CONTENTS 

PAGE 

6.  Duty  to  Act  in  Person  Unless  Otherwise  Authorized     .  448 

7.  Liability  of  Gratuitous  Agent 450 

B.  Ostensible  Authority  of  Agent. 

1.  Agent  to  Sell:    To  Fix  Terms  of  Sale 451 

2.  Agent  to  Sell:    Warranty 452 

3.  Agent  to  Sell :    To  Receive  Payment 453 

4.  Agent  to  Sell :    Payment  of  Commission 453 

5.  Agent  to  Sell :    Exchange 455 

6.  Agent  to  Sell :    To  Rescind  Sale 455 

7.  Agent  to  Purchase 456 

8.  General    Agent 457 

9.  Superintendent 458 

ID.    Doctrine  of  Estoppel  not  Applicable  to  Public  Agents     .  460 

C.  Liability  for  Torts  of  Servant  or  Agent. 

1.  In  General 461 

2.  Fraud  Committed  for  Benefit  of  Agent 462 

3.  Wilful  Torts  of   Servant 462 

4.  Servants  for  Whose  Acts  Master  is  Responsible    .     .     .  463 

5.  Deviation 465 

6.  Servant  Loaned  to  Another 466 

7.  Liability  for  Act  of   Compulsory  Employee      ....  467 

8.  Independent  Contractor 4^7 

9.  Torts  of  Public  Servants 468 

10.    Torts  of  Agents  of  Charitable  Organization     ....  470 

D.  Liability  of  Agent  to  Third  Party. 

1.  In  General :     .     .     .     .  471 

2.  For  Torts 472 

3.  Liability  of  Unauthorized  Agent 474 

4.  Liability  of   Unauthorized   Public  Agent 475 

III.  Undisclosed  Pri nopal 476 

A.  Liability  of  Undisclosed  Principal. 

1.  In  General 477 

2.  EfTcct  of  Refusal  to  Deal  with  Principal 480 

3.  Election  to  Hold  Agent 480 

4.  Suit  Upon  Scaled  Instrument 481 

5.  Suit  Upon  Negotiable  Instrument 483 

6.  Effect  of  Disclosure  of  Principal  in  Negotiable  Instru- 

ment       484 

7.  Effect  of  Clotiiing  Agent  with  Indicia  of  Ownership     .  484 

8.  Effect  of  Factor's  Acts 485 


TABLE   OF    CONTENTS  XXI 

PAGE 

B.  Liability  of  Third  Person  to  Undisclosed  Principal. 

1.  General  Rule 488 

2.  Right  to  Assert  Debt  Due  from  Agent 489 

3.  Exclusive  Credit  Given  to  Agent 490 

4.  Contract  Involving  Financial  Responsibility  of  Agent     .  491 

5.  Right  of  Third  Party  to  Withdrav^^  from  Executory  Con- 

tract      492 

IV.  Termination    of    Agency 493 

1.  Accomplishment  of   Purpose 494 

2.  Change  in  Subject  Matter 495 

3.  Provision    Against   Termination    by    Change    in    Subject 

Matter 496 

4.  Death  of   Principal 497 

5.  Insanity  of  Principal 498 

6.  Revocation  of  Agency 500 

7.  Irrevocable  Agency :    Power  Coupled  with  Interest     .     .  501 

8.  Irrevocable  Agency:    Power  Coupled  with   Duty      .     .  503 

TABLE  OF  CASES >   505 

GLOSSARY.   ...    . .    .....  523 


COMMERCIAL   LAW  CASES 


VOLUME  ONE 


COMMERCIAL  LAW  CASES 


INTRODUCTION 

COMMERCIAL  LAW.  Law,  in  the  technical  sense  of  the 
term,  is  the  body  of  general  rules  regulating  human  conduct, 
recognized  and  enforced  by  public  authority.  Commercial  law  is 
that  body  of  law  which  determines  the  rights  and  duties  of  per- 
sons engaged  in  commerce,  manufacture,  and  trade.  Its  scope  is 
bounded  only  by  the  limits  of  modern  business  enterprise,  as 
no  part  of  the  field  of  law  is  entirely  immaterial  to  some  aspect 
of  industry.  Nevertheless,  there  are  certain  branches  of  law 
which  are  so  specially  related  to  business  transactions  and  or- 
ganization that  they  are  commonly  referred  to  as  commercial  law, 
as  distinguished  from  other  branches  of  law  not  so  intimately 
concerned  with  trade.  Hence,  while  complete  knowledge  of 
commercial  law  would  necessitate  familiarity  with  all  law,  it  is 
usual  to  restrict  the  term  to  those  subjects  dealing  with  rights 
arising  from  contractual  relations  and  from  the  particular  forms 
of  business  activity  through  which  those  contractual  rights 
are  exercised.  The  field  of  law  is  divided  into  substantive  law, 
which  deals  with  legal  rights  and  duties  as  such,  and  adjective 
law,  which  deals  with  the  means  of  securing  enforcement  of  those 
rights  and  duties  in  the  courts.  Commercial  law  belongs  in  the 
former  category,  and  is  limited  to  a  consideration  of  legal  princi- 
ples.   It  is  hot  concerned  with  metheds  of  procedure. 

LEGAL  RIGHTS.  The  legal  rights  with  which  commercial 
law,  as  indeed  all  law,  is  concerned,  may  be  divided  into  two  broad 
classes :  Rights  in  rem,  rights  in  or  against  a  thing  itself,  and 
rights  in  personam,  rights  against  a  person,  without  specific  ref- 
erence to  any  property  in  controversy.  Rights  in  rem  arise  only 
in  reference  to  ownership  or  possession  of  property,  while  rights 
in  personam  arise  out  of  the  infraction  of  legal  duty.  Every  right, 
of  whatever  sort,  carries  with  it  a  corresponding  duty.  If  A 
has  the  right  of  title  to  goods,  it  follows  that  B  has  the  duty  to 
refrain  from  interfering  with  those  goods  of  A.  If  A  has  the 
right  to  walk  upon  the  highway  without  injury  arising  from  the 


2  COMMERCIAL    LAW    CASES 

recklessness  of  B,  B  has  the  duty  so  to  use  the  highway  that  he 
shall  not  recklessly  injure  A.  All  substantive  law  deals  with  that 
obligation  inherent  in  legal  rights  and  duties  which  is  imposed  by 
the  authority  of  the  sovereign  body  that  secures  its  enforcement. 

Rights  generally  arise  either  ex  contractu,  out  of  some  form 
of  agreement,  which  is  the  basis  of  dealings  between  the  parties, 
or  ex  delicto,  out  of  a  wrong  of  one  party  independent  of  agree- 
ment, or,  in  fact,  of  any  privity  between  the  parties.  Contractual 
rights  are  the  basis  of  the  lazu  of  contracts,  the  corner-stone  of  the 
structure  of  commercial  law,  while  rights  arising  from  a  wrong 
form  the  basis  of  the  lazv  of  torts,  a  subject  less  directly  connected 
with  commercial  law,  although  essential  to  a  complete  under- 
standing of  the  subject. 

SOURCES  OF  LAW.  Laws,  like  customs,  differ  with  in- 
dividual states  and  races.  As  most  of  our  customs  are  founded 
on  those  of  England,  so  most  of  our  law  had  its  origin  in  the  law 
of  that  country.  Law  has  been  well  described  as  a  crystallization 
of  public  opinion ;  it  expresses  in  itself  the  ideas  of  justice,  mo- 
rality, and  right  dealing,  inherent  in  the  particular  race  or  state 
which  gives  it  authority.  This  being  true,  it  follows  that  every 
great  movement  in  the  development  of  civilization  has  left  its 
traces  in  the  law,  and  that  the  sources  of  our  law  must  be  found 
in  social  and  economic  tendencies  of  the  past.  The  chief  of  these 
sources  are  the  following : 

Common  law.  The  common  law  of  England,  upon  which  our 
own  common  law  is  based,  is  that  great  body  of  unwritten  law 
founded  on  immemorial  usage  and  the  general  consent  of  the 
people,  which  began  with  customs  of  the  Saxons  and  has  been 
subject  to  steady  development  since  their  time.  The  earlier  law 
of  England,  whether  arising  from  usage  or  from  statute,  was  a 
part  of  the  inheritance  of  our  Colonial  ancestors  and  was,  so  far 
as  compatible  with  conditions  in  the  new  country,  brought  intact 
by  them  into  the  New  World.  Later  English  decisions  and 
developments  are  of  value  as-  analogy  but  are  not  controlling  law, 
because  both  the  legal  and  political  systems  of  the  two  nations 
became  distinct  and  independent  as  a  result  of  the  American 
Revolution. 

The  great  difference  between  the  common  law,  adopted  in 
all  English  speaking  countries,  and  the  civil  law  of  Continental 
Europe,  which  originated  in  the  Roman  law,  grows  out  of  the 
fact  that  the  common  law  is  unwritten  and  is  therefore  flexible. 
It  adapts  itself,  often  without  conscious  change,  to  new  con- 
ditions as  they  arise.  Such  a  body  of  unwritten  law  must,  in 
order  to  have  the  stability  indispensable  to  the  foundation  of  a 
system  under  which  men  can  live  and  act,  be  accompanied  by 


INTRODUCTION  3 

a  certain  rigidity  of  rule,  to  the  end  that  individuals  may  appreci- 
ate their  legal  rights  and  duties  in  advance  of  action  and  may 
have  a  guide  to  conduct.  This  rigidity  finds  its  place  in  our  law 
in  the  determining  force  of  precedent,  the  so-called  doctrine  of 
"stare  decisis,"  the  theory  that  previous  decisions  are  to  be  fol- 
lowed in  subsequent  rulings  of  the  court  unless  they  are  plainly 
wrong.  This  does  not  mean  that  the  previous  decision  may  not 
be  overruled,  but  rather  that  it  shall  be  regarded  as  the  law  until 
such  time  as  it  seems  necessary  to  consider  the  previous  case  no 
longer  appropriate  in  its  application  to  the  facts  in  hand. 

In  the  early  growth  of  the  law,  the  doctrine  of  precedent 
was  far  more  rigid  than  at  the  present  time,  and,  as  manifested 
in  the  enforcement  of  procedural  forms  in  the  common  law 
courts  of  England,  led  to  injustice  which  could  be  cured  only  by 
direct  appeal  to  the  residuary  justice  administered  by  the  king 
in  accordance  with  his  conscience,  rather  than  by  the  formal  law 
of  precedent  applied  in  the  courts.  These  appeals  to  the  king 
came  to  be  referred  for  decision  to  the  council  and  later  to  the 
chancellor,  who  was  the  "keeper  of  the  king's  conscience"  and 
who  decided  them  in  accordance  with  what  he  considered  to  be 
the  conscience  of  the  king. 

Equity.  The  administration  of  such  appeals  was  called  equity, 
as  distinguished  from  the  common  law.  In  it  we  find  another 
source  of  law.  The  chancellor,  who  was  not  bound  by  legal 
doctrine  any  more  than  was  the  king  in  whose  stead  he  made 
decisions,  was  enabled  to  exercise  a  greater  amount  of  personal 
judgment  than  were  the  judges  of  the  law  courts.  This  judg- 
ment was  necessarily  affected  by  the  habit  of  mind  and  by  the 
training  of  the  individual  who  gave  it.  The  habit  of  mind  was 
almost  invariably  that  of  a  churchman,  and  the  training  was  that 
of  one  versed  in  the  Roman  law,  the  basis  of  the  ecclesiastic  or 
canon  law  administered  in  the  monasteries  under  their  preroga- 
tive. It  followed  that  certain  principles  of  the  Roman  law  were 
grafted  upon  the  English  law  through  the  decisions  of  the  chan- 
cellors ;  and  as  each  chancellor,  searching  for  a  rule  of  decision 
in  preference  to  abstract  morality,  inclined  to  follow  judgments 
given  in  similar  cases  by  his  predecessors,  there  grew  up  in  the 
equity  courts  a  body  of  rules  which  in  time  became  little  less 
rigid  than  those  of  the  law  courts  themselves. 

This  new  body  of  law  based  upon  the  rulings  of  successive 
chancellors,  affected  as  it  was  by  their  leaning  toward  the  Roman 
law,  came  into  conflict  with  the  decisions  of  the  law  judges,  and 
a  struggle  for  precedence  resulted.  After  long  conflict  between 
the  courts,  a  division  of  authority  gradually  became  recognized, 
so  that  thereafter  the  equity  courts  entertained  jurisdiction  over 


4  COMMERCIAL   LAW    CASES 

certain  classes  of  cases,  while  other  cases  were  still  retained 
and  finally  adjudicated  in  the  law  courts.  This  distinction  re- 
mains until  the  present  day,  both  in  England  and  the  United 
States ;  and  equity  retains  jurisdiction  over  those  cases  in  which 
there  is  fraud,  breach  of  trust,  hardship  against  which  the  com- 
mon law  affords  no  relief,  or  where  the  machinery  of  the  common 
law  is  not  adapted  to  do  substantial  justice  between  the  parties. 
Some  states  have  gone  so  far  as  to  abolish  all  distinction  between 
actions  brought  at  law  and  in  equity,  resting  each  case  upon 
equitable  or  purely  legal  principles,  as  the  facts  may  warrant. 
Most  states,  however,  still  adhere  to  the  different  forms  of  plead- 
ing in  the  two  classes  of  cases,  although  a  given  court  may  have 
jurisdiction  over  both  law  and  equity  matters.  Only  a  very  few 
states  still  have  different  j'udges  for  the  two  kinds  of  suits. 

Statute  law.  In  addition  to  the  unwritten  law,  a  great  and 
ever-changing  source  of  law  is  to  be  found  in  the  enactment  of 
rules  of  conduct  by  the  legislative  authority  of  the  sovereign 
power,  bound  by  no  precedent  or  authority  other  than  that  of  its 
own  constitution,  which  itself  can  be  changed  by  the  proper 
procedure.  In  England,  the  legislative  body  is  Parliament ;  in  the 
United  States,  Congress  and  the  legislatures  of  the  several  states. 
Legislative  bodies  are  constantly  enacting  new  laws  to  correct 
defects  in  existing  law  and  to  conform  to  the  progress  of  the 
community.  These  statutes,  written  laws,  supersede  the  common 
law  when  the  two  come  into  conflict,  but  otherwise  leave  it  in 
full  force  and  effect.  Some  states,  for  example  New  York,  have 
gone  so  far  as  to  attempt  codification  of  the  entire  common  law 
and  to  re-enact  it  by  means  of  statute  law.  Such  codes,  how- 
ever, have  not  come  into  general  use  and  it  seems  unlikely  that 
the  attempt  will  be  further  extended. 

Other  sources.  While  the  common  law,  the  rules  of  equity, 
and  statute  law  are  the  main  bases  of  our  law,  there  are  certain 
other  sources  of  law  which  have  had  a  more  or  less  direct  effect 
upon  it: 

A.  Tlic  Canon  Lazv.  The  ecclesiastical,  or  canon  law,  the 
law  of  the  Church,  first  of  Rome  and  then  of  England,  as  de- 
veloped from  the  Roman  law,  formerly  regulated  those  rights 
and  duties  which  were  deemed  to  be  especially  within  the  sphere 
of  spiritual  authority.  The  leading  example  of  this  type  of  case 
is  that  of  marital  relations,  until  comparatively  recently  heard 
and  determined  in  England  by  the  spiritual  courts. 

1).  Ciznl  Lazv.  The  civil  law  is  that  great  body  of  written 
law  in  effect  on  the  continent  of  Europe,  originating  in  the  Roman 
law,  and  coming  from  the  Roman  law  by  various  channels,  gen- 
erally direct,  into  the  modern  European  law.     These  principles 


INTRODUCTION  5 

find  chief  expression  in  our  law  of  admiralty,  the  law  of  maritime 
affairs,  which  was  long  regulated  by  a  special  court  nominated 
originally  by  the  merchants  for  the  settlement  of  disputes  arising 
in  such  matters.  While  the  civil  law  is  not  recognized  by  the 
American  law  as  a  direct  source,  it  has  left  its  impress  not  only 
on  admiralty  law  but  also  on  the  law  of  those  states,  such  as 
Florida  and  Louisiana,  which  were  originally  under  Spanish  and 
French  control,  and  were  subject  to  the  civil  law  itself. 

C.  The  Law  Merchant.  The  law  merchant  rests  upon  a 
body  of  principles  found  by  English  traders  to  exist  upon  the 
Continent  in  the  Middle  Ages  and  adopted  by  them  as  better 
suited  to  commercial  usages  than  many  of  the  rules  of  the  English 
common  law.  This  law  was  for  a  time  enforced  only  by  action 
of  the  merchants  themselves,  but  in  early  modern  times,  it  was 
brought  into  the  common  law,  recognized  as  a  system  of  valid 
mercantile  customs,  and  enforced  by  the  common  law  courts. 
The  law  of  bills,  notes,  and  checks  is  a  direct  outgrowth  from 
the  law  merchant  based  upon  the  idea  of  negotiability,  an  idea 
diametrically  opposed  to  the  English  common  law  idea  that  only 
those  persons  who  are  direct  parties  to  a  contract  can  acquire 
rights  under  it. 

JURISDICTION.  In  England,  the  source  of  all  legal  au- 
thority is  a  single  sovereign,  while  in  the  United  States  we  live 
under  a  divided  sovereignty  and  are  subject  both  to  the  laws  of 
the  states  and  of  the  United  States.  When  the  thirteen  colonies 
declared  their  independence  of  the  mother  country,  they  re- 
nounced all  allegiance  to  that  sovereign  and  themselves  assumed 
the  attributes  of  sovereignty,  that  authority  which  owes  allegiance 
to  no  other  and  is  bound  by  no  duties  other  than  those  of  in- 
ternational law.  During  the  war  of  the  Revolution  there  were, 
then,  thirteen  separate  and  distinct  sovereigns,  each  of  them 
autonomous  and  acting  in  concert  with  the  others  only  as  its  inter- 
ests might  appear  best  served  by  so  doing.  After  the  exigencies 
of  war  had  passed,  it  became  evident  that  thirteen  separate 
sovereigns,  each  with  its  own  system  of  taxation,  currency  and 
tariff,  could  not  have  that  unity  of  purpose  which  was  by  all  con- 
ceded to  be  desirable.  For  that  reason,  by  the  adoption  of  the 
Constitution,  each  of  the  thirteen  states  gave  up  a  portion  of  its 
sovereignty  to  the  central  federal  government,  reserving  to  itself 
those  attributes  which  were  not  expressly  or  impliedly  granted 
under  the  terms  of  the  Constitution  of  the  United  States  of 
America.  From  this  it  follows  that  a  citizen  of  the  United  States 
of  America  owes  allegiance  to  two  sovereigns:  First,  to  the 
United  States  of  America,  in  respect  to  those  attributes  of 
sovereignty  granted  to  the  federal  government  by  the  states,  and, 


O  COMMERCIAL   LAW    CASES 

second,  to  the  particular  state  of  which  he  may  be  a  citizen.  Per- 
sons within  the  borders  of  the  United  States,  whether  citizens 
or  not,  are  subject  to  the  laws  of  the  United  States  of  America, 
in  so  far  as  those  laws  may  be  material,  and  to  those  of  the 
states  so  far  as  all  other  obligations  are  concerned.  In  passing, 
it  is  well  to  note  that  there  is,  strictly  speaking,  no  common  law 
of  the  United  States.  All  powers  of  the  federal  government  are 
derived  from  the  Constitution,  which  is  really  an  authority  given 
by  the  states  to  the  central  government  to  legislate  concerning 
certain  specified  subjects,  and  those  only.  Until  such  time  as 
Congress  acts,  the  states  retain  their  previous  control.  As  juris- 
diction by  the  central  authority  can  be  acquired,  then,  only  by 
legislation,  all  federal  law  must  be  statutory,  and  while  the  com- 
mon law  may  aid  in  its  interpretation,  no  direct  sanction  can 
be  found  in  any  source  other  than  the  Constitution  and  the  acts 
of  Congress. 

State  Courts.  The  courts  of  any  state  may  be  broadly  divided 
into  three  classes:  i.  Inferior  Courts.  2.  Superior  Courts. 
3.  Supreme  Courts. 

The  inferior  courts,  consisting  of  a  judge  sitting  without  a 
jury,  have  jurisdiction  over  small  crimes  and  the  smaller  civil 
actions.  From  them,  an  appeal  almost  invariably  lies  both  on 
questions  of  law  and  fact  to  the  Superior  Court,  sitting  in  the 
county  in  which  the  action  was  brought.  It  is  here  that  the  more 
important  cases  are  originally  brought ;  that  a  jury  trial  is  had 
if  claimed  by  either  of  the  parties ;  and  that  most  questions  of 
fact  are  finally  determined.  Of  equal  dignity  and  power,  often 
as  a  part  of  the  Superior  Court,  are  the  courts  of  Equity,  the 
Probate  Court,  and,  in  some  states,  the  Land  Court.  The  Equity 
Court  in  most  jurisdictions  is  now  a  part  of  the  Superior  Court 
and  the  same  judges  sit  one  term  at  law  and  another  term  in 
equity.  Though  a  jury  may  be  granted  in  the  discretion  of  the 
judge,  there  is  no  right  of  trial  by  jury  in  the  Equity  Court, 
a  principle  which  necessarily  follows  from  the  historical  develop- 
ment of  equity  jurisdiction,  originally  based  upon  an  appeal  to 
the  king.  Probate  Courts  have  jurisdiction  over  matters  concern- 
ing the  estates  of  deceased  persons  and  often,  to  a  certain  extent, 
over  domestic  relations.  Land  Courts  are  established  in  those 
states  which  have  a  system  of  registration  of  land,  and  have  juris- 
diction over  matters  pertaining  to  such  registration.  From  courts 
of  superior  jurisrliction,  questions  of  law  may  be  taken  to  the  Su- 
y)reme  Court,  which  is  the  final  arbiter  on  matters  of  law,  and 
which  may  have  original  jurisdiction  in  the  larger  civil  cases, 
both  at  law  and  in  eciuity.  Questions  of  law  are  brought  to  the 
Sui)rcme  Court  by   means   of  exceptions  taken   at  the  trial   in 


INTRODUCTION  7 

the  Superior  Court  or  by  means  of  appeal.  From  the  Supreme 
Court  of  the  state,  there  is  no  appeal  except  on  questions  in- 
volving the  Constitution  of  the  United  States.  These  cases 
may  be  taken  to  the  Supreme  Court  of  the  United  States. 

This  arrangement  of  courts  is  in  effect  in  all  states,  although 
the  nomenclature  may  differ.  For  example,  in  New  York,  the 
Supreme  Court  corresponds  to  what  has  been  here  designated  as 
the  Superior  Court,  and  the  Court  of  Appeals  to  the  Supreme 
Court. 

Federal  Courts.  The  courts  of  the  United  States  are  em- 
powered to  hear  cases  arising  under  the  Constitution,  laws  and 
treaties  of  the  United  States ;  they  may  also  take  judisdiction 
over  controversies  between  states,  and  between  citizens  of  dif- 
ferent states.  They  are  composed  as  follows :  The  District 
Court,  the  lowest  federal  court,  corresponds  to  the  Superior  Court 
in  the  state,  and  has  jurisdiction  over  a  district,  generally  state- 
wide except  in  the  larger  states.  It  sits  both  at  law  and  in  equity 
and  is  the  final  court  of  fact.  It  is  also  a  Bankruptcy  Court, 
having  jurisdiction  over  cases  arising  under  the  bankruptcy  law 
of  the  United  States.  From  the  District  Court,  lies  an  appeal  on 
questions  of  law  to  the  Circuit  Court  of  Appeals,  made  up  of 
judges  chosen  from  several  districts,  sitting  to  review  matters 
of  law  but  not  of  fact.  From  the  Circuit  Court  of  Appeals,  in 
turn,  there  is  an  appeal  on  certain  questions  of  law  to  the  Supreme 
Court  of  the  United  States,  sitting  at  Washington,  and  composed 
of  a  Chief  Justice  and  eight  Associate  Justices.  This  court 
has  original  j'urisdiction  over  proceedings  brought  against  for- 
eign representatives,  and  controversies  of  a  civil  nature  to  which 
a  state  is  a  party.  It  has  appellate  jurisdiction  on  matters  of  law 
in  cases  which  involve  the  jurisdiction  of  the  court  below,  con- 
viction for  a  capital  crime  against  the  United  States,  or  the 
construction   or   application   of   the  United    States   Constitution. 


Chapter  I. 
FORMATION  OF  CONTRACTS. 

A  contract  is  an  agreement  resulting  in  an  obligation  enforce- 
able by  law.  Agreement  is  assent  regarding  something  to  be  done 
or  forborne  by  one  person  for  another.  It  is  reached  when  the 
parties  express  their  mutual  assent  to  be  bound  and  entitled  by  its 
terms.  It  may  be  express,  when  the  parties  actually  state  the 
terms  to  each  other ;  implied,  when,  without  specifying  all  the 
terms,  they  indicate  by  their  conduct  a  common  intention  to  con- 
tract ;  or  quasi  contractual,  when  the  agreement  is  imposed  by 
law  without  the  assent  of  parties,  as,  for  example,  when  they  are 
unwilling  to  agree,  or  incapable  of  so  doing. 

The  obHgation  of  a  contract  consists  in  the  right  of  one  party 
to  require  the  other  to  perform,  and  the  duty  of  that  other  to 
perform  accordingly.  A  legal  obligation,  as  distinguished  from  a 
moral  obligation,  which  may  or  may  not  be  a  legal  obligation  as 
well,  is  one  enforceable  by  law.  To  summarize  in  anticipation  the 
elements  necessary  to  enforceability,  a  contract  must  satisfy  the 
following  requirements : 

1.  An  agreement  of  the  parties. 

2.  Proper  form. 

3.  Consideration. 

4.  Contractual  capacity. 

5.  Real  consent  to  its  terms. 

6.  A  legal  object. 

These  will  be  considered  in  order. 

A  contract  is  executory  when  something  remains  to  be  done 
by  one  or  all  the  parties  to  it ;  it  is  executed  when  nothing  remains 
to  be  done  by  any  party.  An  executory  contract,  then,  becomes 
an  executed  contract  on  fulfilment  of  the  obligation  of  all  parties. 
Contracts  are  often  said  to  be  unilateral  or  bilateral.  Strictly 
speaking,  a  unilateral  contract  is  one  in  which  there  is  a  promise 
on  one  side  only,  the  consideration  on  the  other  side  being  ex- 
ecuted. A  bilateral  contract  consists  solely  of  mutual  promises 
to  do  some  future  acts,  the  promise  of  one  party  being  given  for 
the  promise  of  the  other. 

9 


lO  COMMERCIAL   LAW    CASES 

I.     Express,  Implied  and  Quasi  Contracts. 

Highway  Commissioners  v.   The  City  of  Bloomington.  2^^ 
III.  164. 

The  Board  of  Highway  Commissioners  sues  the  city  to  obtain 
the  amount  of  taxes  collected  by  the  city  under  a  statute  subse- 
quently held  unconstitutional.  This  amount,  which  should  prop- 
erly have  gone  to  the  Board,  the  city  tries  to  retain  on  the  ground 
that  there  was  no  contract  between  the  Board  and  the  city. 

Held,  that  the  Commissioners  could  recover  on  the  theory  that 
when  one  person  has  money  or  other  property  in  his  hands  which 
he  ought  to  deliver  to  the  owner,  no  contract  is  required  other 
than  that  implied  in  law. 

Vickers,  J. 

As  ordinarily  understood,  the  only  difference  between  an  express 
contract  and  an  implied  contract  is,  that  in  the  former  the  parties 
arrive  at  their  agreement  by  words,  either  oral  or  written,  sealed  or 
unsealed,  while  in  the  latter  their  agreement  is  arrived  at  by  a  con- 
sideration of  their  acts  and  conduct.  In  both  of  these  cases  there  is, 
in  fact,  a  contract  existing  between  the  parties,  the  only  difference 
being  in  the  character  of  the  evidence  necessary  to  establish  it.  A 
familiar  illustration  of  an  implied  contract  is,  where  one  person,  in  the 
absence  of  any  express  agreement,  renders  valuable  services  to  an- 
other which  are  knowingly  accepted  by  such  other,  the  law  will  imply 
a  promise  to  pay  a  fair  and  reasonable  compensation  for  such  services. 
If  an  attorney  renders  services  without  any  express  agreement  as  to 
the  amount  of  compensation  to  be  received,  the  law  implies  a  promise 
to  pay  him  reasonable  compensation  for  the  work  done.  These  illus- 
trations are  examples  of  genuine  implied  contracts,  in  all  of  which 
there  is  some  act  or  line  of  conduct  as  a  basis  for  the  implication  and 
which  furnish  the  necessary  privity  to  support  the  action.  This 
class  of  implied  contracts  is  sometimes  called  contracts  implied  as  of 
fact.  After  subtracting  express  contracts  and  contracts  implied  in 
fact,  there  is  still  left  another  large  class  of  obligations.  The  principle 
upon  which  this  latter  class  of  obligations  rests  is  equitable  in  its 
nature,  and  was,  like  most  other  equitable  principles,  derived  from  the 
civil  law.  This  obligation  was  under  the  civil  law  designated  qtiasi- 
contractns.  Stated  as  a  civil  law  principle,  it  was  "an  obligation  sim- 
ilar in  character  to  that  of  a  contract,  but  which  arises  not  from  an 
agreement  of  parties  but  from  some  relation  between  them  or  from 
a  voluntary  act  of  one  of  them,  or,  stated  in  other  language,  an 
obligation  springing  from  voluntary  and  lawful  acts  of  parties  in  the 
absence  of  any  agreement."  In  quasi  contracts  the  obligation  arises 
not  from  consent,  as  in  a  case  of  contracts,  but  from  the  law  or  nat- 
ural equity.  The  term  was  not  found  in  the  common  law,  but  it 
has  been  taken  by  writers  upon  the  common  law  from  the  Roman  law 
and  may  be  considered  now  as  quite  domesticated. 


FORMATION    OF    CONTRACTS  II 

The  class  of  oblip^ations  now  under  consideration,  and  which  are 
treated  in  works  on  contracts  as  "contracts  implied  in  law,"  or  quasi 
contracts,  are  recognized  and  enforced  by  common  law  courts.  The 
liability  exists  from  an  implication  of  law  that  arises  from  the  facts 
and  circumstances  independent  of  agreement  or  presumed  intention. 
In  this  class  of  cases  the  notion  of  a  contract  is  purely  fictitious.  There 
are  none  of  the  elements  of  a  contract  that  are  necessarily  present. 
The  intention  of  the  parties  in  such  case  is  entirely  disregarded,  while 
in  cases  of  express  and  implied  contracts  in  fact  the  intention  is  of 
the  essence  of  the  transaction.  In  the  case  of  contracts  the  parties  fix 
their  terms  and  set  the  bounds  upon  their  liability.  As  has  been  well 
said,  in  the  case  of  contracts  the  agreement  defines  the  duty,  while  in 
the  latter  class  of  cases  "the  duty  defines  the  contract."  The  action  is 
in  form  ex  contractu,  but  the  alleged  contract  being  purely  fictitious, 
the  right  to  recover  does  not  depend  upon  any  principles  of  privity  of 
contract  between  the  plaintiff  and  the  defendant  and  no  privity  is 
necessary.  The  right  to  recover  is  governed  by  principles  of  equity 
although  the  action  is  at  law.  The  action  is  maintainable  in  all  cases 
where  one  person  has  received  money  or  its  equivalent  under  such 
circumstances  that  in  equity  and  good  conscience  he  ought  not  to  retain 
it  and  which  ex  cequo  et  bono  belongs  to  another. 

2.     Implied  Contracts. 

Day  V.  Cat  on.  up  Mass.  5/j. 

Day  built  a  brick  party  wall  upon  and  between  adjoining 
estates,  one  of  which  he  owned,  and  the  other  of  which  Caton, 
the  defendant,  owned.  They  had  had  no  conversation  about  the 
wall,  but  the  plaintiff  undertook  and  completed  the  building  of 
the  wall  with  the  expectation  that  the  defendant  would  pay  him 
for  it.  Caton  had  reason  to  know  that  the  plaintiff  was  acting 
with  that  expectation  and  allowed  him  thus  to  act  without  objec- 
tion.   The  plaintiff  sues  to  recover  one-half  of  its  value. 

Held,  that  the  plaintiff  may  recover  upon  the  theory  of  an 
implied  contract. 

Dez'ens,  J. 

The  fact  that  the  plaintiff  expected  to  be  paid  for  the  work  would 
certainly  not  be  sufficient  of  itself  to  establish  the  existence  of  a  con- 
tract, when  the  question  between  the  parties  was  whether  one  was 
made.  It  must  be  shown  that,  in  some  manner,  the  party  sought  to 
be  charged  assented  to  it.  If  a  party,  however,  voluntarily  accepts 
and  avails  himself  of  valuable  services  rendered  for  his  benefit,  when 
he  has  the  option  whether  to  accept  or  reject  them,  even  if  there  is  no 
distinct  proof  that  they  were  rendered  by  his  authority  or  request,  a 
promise  to  pay  for  them  may  be  inferred.  His  knowledge  that  they 
were  valuable,  and  his  exercise  of  the  option  to  avail  himself  of  them, 
justify  this  inference.     And  when  one  stands  by  in  silence  and  sees 


12  COMMERCIAL    LAW    CASES 

valuable  services  rendered  upon  his  real  estate  by  the  erection  of  a 
structure  (of  which  he  must  necessarily  avail  himself  afterwards  in 
his  proper  use  thereof),  such  silence,  accompanied  with  the  knowledge 
on  his  part  that  the  party  rendering  the  services  expects  payment  there- 
for, may  fairly  be  treated  as  evidence  of  an  acceptance  of  it,  and  as 
tending  to  show  an  agreement  to  pay  for  it. 

If  silence  may  be  interpreted  as  assent  where  a  proposition  is 
made  to  one  which  he  is  bound  to  deny  or  admit,  so  also  it  may  be  if 
he  is  silent  in  the  face  of  facts  which  fairly  call  upon  him  to  speak. 

The  circumstances  of  each  case  would  necessarily  determine 
whether  silence  with  a  knowledge  that  another  was  doing  valuable 
work  for  his  benefit,  and  with  the  expectation  of  payment,  indicated 
that  consent  which  would  give  rise  to  the  inference  of  a  contract.  The 
question  would  be  one  for  the  jury. 

3.     Implied  Contracts;  Necessity  of  Privity  Between  Parties. 

Boston  Ice  Co.  v.  Potter.  12s  Mass.  28. 

Potter  took  ice  from  the  Boston  Ice  Company,  but  on  account 
of  some  dissatisfaction  with  the  manner  of  supply,  terminated 
his  contract  and  took  ice  from  the  Citizens'  Ice  Company.  The 
Citizens'  Ice  Company  thereafter  sold  its  business  to  the  Boston 
Ice  Company,  which  left  ice  every  day  with  Potter.  Potter  knew 
nothing  of  the  change  in  ownership  of  the  business  and  supposed 
that  he  was  getting  ice  from  the  Citizens'  Ice  Company.  Upon 
his  refusal  to  pay  the  Boston  Ice  Company  for  the  ice  left  by  it, 
the  Boston  Ice  Company  sues  to  recover  the  price  of  the  ice 
delivered. 

Held,  that  in  order  to  recover,  the  plaintiff  must  show  some 
contract  with  the  defendant.  There  was  no  express  contract, 
and  upon  the  facts  no  contract  with  him  was  implied. 

Endicott,  J. 

A  party  has  a  right  to  select  and  determine  with  whom  he  will 
contract,  and  cannot  have  another  person  thrust  upon  him  without  his 
consent.  It  may  be  of  importance  to  him  who  performs  the  contract, 
as  when  he  contracts  with  another  to  paint  a  picture,  or  write  a  book, 
or  furnish  articles  of  a  particular  kind,  or  when  he  relies  upon  the 
character  or  qualities  of  an  individual,  or  has,  as  in  this  case,  reasons 
why  he  docs  not  wish  to  deal  with  a  particular  party.  In  all  these 
cases,  as  he  may  contract  with  whom  he  pleases,  the  sufficiency  of 
ills  reasons  for  so  doing  cannot  be  inquired  into.  If  the  defendant, 
before  receiving  the  ice,  or  during  its  delivery,  had  received  notice 
of  the  change,  and  that  the  Citizens'  Ice  Company  could  no  longer 
perform  its  contract  with  him,  it  would  then  have  been  his  undoubted 
right  to  have  rescinded  the  contract  and  to  decline  to  have  it  executed 
by  the  plaintiff.     lUit  this  he  was  unable  to  do,  because  the  plaintiff 


FORMATION    OF    CONTRACTS  I3 

failed  to  inform  him  of  that  which  he  had  a  right  to  know.  If  he  had 
received  notice  and  continued  to  take  the  ice  as  deHvered,  a  contract 
would  be  implied. 

4.  Executory  and  Executed  Contracts. 

Fletcher  v.  Peck.  6  Cranch   {U.  S.)  8/. 

The  state  of  Georgia  passed  an  act  authorizing  the  governor 
to  sell  certain  unappropriated  state  territory.  This  act  was  sub- 
sequently repealed  and  declared  null  and  void.  In  the  meantime, 
Fletcher  had  become  possessed  of  certain  land  under  the  legisla- 
tive act  by  purchase  from  Peck,  the  original  grantee.  He  now 
sues  for  breach  of  Peck's  covenant  that  he  gave  a  good  title. 

Held,  that  under  the  Federal  Constitution  no  state  may  pass 
a  law  impairing  the  obligation  of  contracts,  which  would  result, 
were  the  repealing  act  constitutional ;  and  that  therefore  Fletcher 
has  a  good  title. 

Marshall,  C.  J. 

Is  a  grant  a  contract? 

A  contract  is  a  compact  between  two  or  more  parties,  and  is  either 
executory  or  executed.  An  executory  contract  is  one  in  which  a  party 
binds  himself  to  do,  or  not  to  do,  a  particular  thing;  such  was  the  law 
under  which  the  conveyance  was  made  by  the  governor,  A  contract 
executed  is  one  in  which  the  object  of  contract  is  performed;  and  this, 
says  Blackstone,  differs  in  nothing  from  a  grant.  The  contract  be- 
tween Georgia  and  the  purchasers  was  executed  by  the  grant.  A 
contract  executed,  as  well  as  one  which  is  executory,  contains  ob- 
ligations binding  on  the  parties.  A  grant,  in  its  own  nature,  amounts 
to  an  extinguishment  of  the  right  of  the  grantor,  and  implies  a  con- 
tract not  to  reassert  that  right.  A  party  is,  therefore,  always 
estopped  by  his  own  grant. 

It  is,  then,  the  unanimous  opinion  of  the  court,  that,  in  this  case, 
the  estate  having  passed  into  the  hands  of  a  purchaser  for  a  valuable 
consideration,  without  notice,  the  state  of  Georgia  was  restrained, 
either  by  general  principles  which  are  common  to  our  free  institu- 
tions, or  by  the  particular  provisions  of  the  constitution  of  the  United 
States,  from  passing  a  law  whereby  the  estate  of  the  plaintiff  in  the 
premises  so  purchased  could  be  constitutionally  and  legally  impaired 
and  rendered  null  and  void. 

5.  Legal  and  Moral  Obligation. 

Mills  V.  Wyniaii.  ^  Pick.  (Mass.)  2oy. 

Wyman's  adult  son,  who  had  ceased  to  be  a  member  of  his 
family,  was  taken  sick  on  his  return  from  a  sea  voyage  and  was 
boarded    and    nursed    by    the    plaintiff,    Mills.      The    defendant, 


14  COMMERCIAL    LAW    CASES 

Wyman,  subsequently  wrote  a  letter  to  the  plaintiff  promising-  to 
pay  for  these  expenses. 

Held,   that   there   was   here   no   obligation   beyond   a   moral 
obligation. 

Parker,  C.  J. 

The  defendant,  his  father,  on  being  informed  of  this  event,  influ- 
enced by  a  transient  feeling  of  gratitude,  promises  in  writing  to  pay 
the  plaintiff  for  the  expenses  he  had  incurred.  But  he  has  determined 
to  break  this  promise,  and  is  willing  to  have  his  case  appear  on  record 
as  a  strong  example  of  particular  injustice  sometimes  necessarily 
resulting  from  the  operation  of  general  rules. 

It  is  said  a  moral  obligation  is  a  sufficient  consideration  to  support 
an  express  promise ;  and  some  authorities  lay  down  the  rule  thus 
broadly ;  but  upon  examination  of  the  cases  we  are  satisfied  that  the 
universality  of  the  rule  cannot  be  supported,  and  that  there  must  have 
been  some  pre-existing  obligation,  which  has  become  inoperative  by 
positive  law,  to  form  a  basis  for  an  effective  promise.  The  cases  of 
debts  barred  by  the  statute  of  limitations,  of  debts  incurred  by  infants, 
of  debts  of  bankrupts,  are  generally  put  for  illustration  of  the  rule. 
Express  promises  found  on  such  pre-existing  equitable  obligations 
may  be  enforced;  there  is  a  good  consideration  for  them;  they  merely 
remove  an  impediment  created  by  law  to  the  recovery  of  debts  hon- 
estly due,  but  which  public  policy  protects  the  debtors  from  being 
compelled  to  pay.  In  all  these  cases  there  was  originally  a  quid  pro 
quo;  and  according  to  the  principles  of  natural  justice  the  party 
receiving  ought  to  pay;  but  the  legislature  has  said  he  shall  not  be 
coerced ;  then  comes  the  promise  to  pay  the  debt  that  is  barred,  the 
promise  of  the  man  to  pay  the  debt  of  the  infant,  of  the  discharged 
bankrupt  to  restore  to  his  creditor  what  by  the  law  he  had  lost.  In  all 
these  cases  there  is  a  moral  obligation  founded  upon  an  antecedent 
valuable  consideration.  These  promises,  therefore,  have  a  sound 
legal  basis.  They  are  not  promises  to  pay  something  for  nothing; 
not  naked  pacts ;  but  the  voluntary  revival  or  creation  of  obligation 
which  before  existed  in  natural  law,  but  which  had  been  dispensed 
with,  not  for  the  benefit  of  the  party  obliged  solely,  but  principally 
for  the  public  convenience.  If  moral  obligation,  in  its  fullest  sense, 
is  a  good  substratum  for  an  express  promise,  it  is  not  easy  to  perceive 
why  it  is  not  equally  good  to  support  an  implied  promise.  What  a  man 
ought  to  do,  generally  he  ought  to  be  made  to  do,  whether  he  promise 
or  refuse.  But  the  law  of  society  has  left  most  of  such  obligation 
to  the  interior  forum,  as  the  tribunal  of  conscience  has  been  aptly 
called. 

A  deliberate  promise,  in  writing,  made  freely  and  without  any 
mistake,  one  which  may  lead  tlie  party  to  whom  it  is  made  into  con- 
tracts and  expenses,  cannot  be  broken  without  a  violation  of  moral 
duty.  But  if  there  was  nothing  paid  or  promised  for  it,  the  law, 
perhaps  wisely,  leaves  the  execution  of  it  to  the  conscience  of  him 


FORMATION    OF    CONTRACTS  I5 

who  makes  it.  It  is  only  when  the  party  making  the  promise  gains 
something,  or  he  to  whom  it  is  made  loses  something,  that  the  law 
gives  the  promise  validity. 

These  principles  are  deduced  from  the  general  current  of  decided 
cases  upon  the  subject,  as  well  as  from  the  known  maxims  of  the 
common  law.  The  general  position,  that  moral  obligation  is  a  suffi- 
cient consideration  for  an  express  promise,  is  to  be  limited  in  its  appli- 
cation to  cases  where  at  some  time  or  other  a  good  or  valuable  con- 
sideration has  existed. 

I. 

AGREEMENT. 

An  agreement  is  usually  reached  by  an  ofifer  of  one  party  and 
an  acceptance  by  the  other.  The  ofifer  may  consist  of  a  promise 
or  an  act.  The  acceptance  may  be  made  by  the  giving  of  a 
promise,  by  the  doing  of  an  act,  or,  in  a  few  cases,  by  simple 
assent. 

The  offer  must  be  communicated  by  words  or  conduct ;  it  must 
contemplate  the  formation  of  a  legal  relationship,  and  must  be  more 
than  an  advertisement,  ofifer  to  deal,  or  step  in  uncompleted  nego- 
tiations. It  may  be  made  to  a  definite  person  or  to  one  of  a  class 
of  persons,  but  no  contract  will  result  until  it  has  been  ac- 
cepted by  a  definite  person  with  knowledge  of  the  ofifer.  The 
offer  itself  must  also  be  definite.  An  offer  may  be  revoked  at 
any  time  before  it  has  been  accepted,  unless  the  offer  is  under 
seal.  Revocation  takes  effect  when  notice  of  the  revocation  reaches 
the  offeree.  Death  of  the  offerer  prior  to  acceptance  revokes 
that  offer.  The  offer  will  lapse  without  notice  of  revocation, 
when  the  time  specified  has  passed,  on  rejection  of  the  offer,  or 
within  a  reasonable  time. 

The  acceptance  must  ordinarily  be  communicated  unless  the 
offer  contemplates  the  performance  of,  or  forbearance  from,  an 
act,  in  which  case  the  performance  or  forbearance  may  itself  be 
the  acceptance.  Such  an  act  or  forbearance  must  be  the  one  con- 
templated by  the  offerer  and  must  indicate  unambiguous  acceptance 
by  the  offeree.  Acceptance  by  silence  can  be  made  only  in  the 
case  of  sealed  contracts  or  when  the  relationship  of  the  parties 
is  such  that  silence  may  properly  imply  consent.  Acceptance  takes 
effect  when  the  acceptor  puts  notice  thereof  beyond  his  own  con- 
trol, unless  the  terms  of  the  offer  require  receipt  of  notice  of 
acceptance.  The  manner  of  acceptance  may  be  defined  by  the 
offer ;  otherwise  the  express  or  implied  intent  of  the  parties  will 
govern.  The  acceptance  must  be  absolute  and  unconditional ;  iden- 
tical with  the  terms  of  the  offer ;  within  the  time  contemplated ; 
and  must  not  be  a  counter-offer. 


l6  COMMERCIAL    LAW.  CASES 

A.     Offers. 

I.     Offer  and  Acceptance  by  Conduct. 

Austin  V.  Biirgc.  i^6  Mo.  App.  286. 

The  plaintiff,  Austin,  was  the  pubHsher  of  a  newspaper  which 
he  sent  to  the  defendant,  Biirge,  for  two  years,  the  subscription 
being  paid  by  the  defendant's  father-in-law.  Austin  continued  to 
send  the  paper  to  the  defendant  for  several  years  more.  On  two 
occasions.  Burge  paid  a  bill  presented  for  the  subscription  price, 
but  each  time  directed  that  the  paper  be  stopped.  Notwithstand- 
ing this  order,  the  plaintiff'  continued  to  send  the  paper  to  him  and 
he  continued  to  receive  and  read  it. 

Held,  that  a  contract  was  formed  between  the  parties  by  their 
conduct,  the  act  of  sending  the  paper  being  the  offer,  and  the 
receipt  and  use  of  it  the  acceptance. 

Ellison,  J . 

It  is  certain  that  one  cannot  be  forced  into  contractual  relations 
with  another  and  that  therefore  he  cannot,  against  his  will,  be  made 
the  debtor  of  a  newspaper  publisher.  But  it  is  equally  certain  that 
he  may  cause  contractual  relations  to  arise  by  necessary  implication 
from  his  conduct.  The  law  in  respect  to  contractual  indebtedness  for 
a  newspaper  is  not  different  from  that  in  relation  to  other  things  which 
have  not  been  made  the  subject  of  an  express  agreement.  Thus,  one 
may  not  have  ordered  supplies  for  his  table,  or  other  household 
necessities,  yet  if  he  continue  to  receive  and  use  them,  under  circum- 
stances where  he  had  no  right  to  suppose  they  were  a  gratuity,  he  will 
be  held  to  have  agreed,  by  implication,  to  pay  their  value.  In  this  case 
defendant  admits  that  notwithstanding  he  ordered  the  paper  discon- 
tinued at  the  time  when  he  paid  a  bill  for  it,  yet  the  plaintitY  continued 
to  send  it  and  he  continued  to  take  it  from  the  post  otSce  to  his  home. 
This  was  an  acceptance  and  use  of  the  property,  and  there  being  no 
pretense  that  a  gratuity  was  intended,  an  obligation  arose  to  pay  for  it. 

2.     Communication  of  Offer:  Necessity  of  Knowledge  of  Of- 
feree of  Offer. 

Broadnax  z'.  Ledbcttcr.  100  Tex.  ^/^. 

Ledbetter,  the  sheriff"  of  Dallas  County,  offered  a  reward  for 
the  re-capture  of  an  escaped  convict.  Broadnax  captured  the  pris- 
oner and  returned  him  to  custody,  having  no  knowledge  of  the 
reward.     He  later  sues  to  recover  the  amount  of  the  reward. 

Held,  that  notice  or  knowledge  of  the  offer  of  the  reward,  when 
the  re-capture  was  made,  was  essential  to  the  plaintiff's  right  to 
recover. 


FORMATION    OF    CONTRACTS  17 

Williams,  A.  J. 

The  liability  for  a  reward  of  this  kind  must  be  created,  if  at  all, 
by  contract.  There  is  no  rule  of  law  which  imposes  it  except  that 
which  enforces  contracts  voluntarily  entered  into.  A  mere  offer  or 
promise  to  pay  does  not  give  rise  to  a  contract.  That  requires  the 
assent  or  meeting  of  two  minds  and  therefore  is  not  complete  until 
the  offer  is  accepted.  Such  an  oft'er  as  that  alleged  may  be  accepted 
by  anyone  who  performs  the  service  called  for,  when  the  acceptor 
knows  that  it  has  been  made  and  acts  in  performance  of  it,  but  not 
otherwise.  He  may  do  such  things  as  are  specified  in  the  offer,  but, 
in  so  doing,  does  not  act  in  performance  of  it  and  therefore  does  not 
accept  it,  when  he  is  ignorant  of  its  having  been  made.  There  is  no 
such  mutual  agreement  of  minds  as  is  essential  to  a  contract.  The 
offer  is  made  to  anyone  who  will  accept  it  by  performing  the  specified 
acts,  and  it  only  becomes  binding  when  another  mind  has  embraced 
and  accepted  it.  The  mere  doing  of  specified  things  without  reference 
to  the  offer  is  not  the  consideration  for  which  it  calls.  This  is  the 
theory  of  the  authorities  which  we  regard  as  sound. 

Reasons  have  been  put  forward  of  a  supposed  public  policy, 
assuming  that  persons  will  be  stimulated  by  the  enforcement  of  offers 
of  rewards  in  such  cases  to  aid  in  the  detection  of  crime  and  the 
arrest  and  punishment  of  criminals.  But,  aside  from  the  fact  that  the 
principles  of  law  to  be  laid  down  cannot  on  any  sound  system  of 
reasoning  be  restricted  to  offers  made  for  such  purposes,  it  is  difficult 
to  see  how  the  activities  of  people  can  be  excited  by  offers  of  rewards 
of  which  they  know  nothing.  If  this  reason  had  foundation  in  fact, 
it  would  hardly  justify  the  courts  in  requiring  private  citizens  to 
minister  to  the  supposed  public  policy  by  paying  rewards,  merely 
because  they  have  made  offers  to  pay  upon  which  no  one  had  acted. 
Courts  can  only  enforce  liabilities  which  have  in  some  way  been  fixed 
by  the  law.  While  we  have  seen  no  distinction  suggested,  it  may  well 
be  supposed  that  a  person  might  become  legally  entitled  to  a  reward 
for  arresting  a  criminal,  although  he  knew  nothing  of  its  having  been 
offered,  where  it  was  offered  in  accordance  with  law  by  the  govern- 
ment. A  legal  right  might  in  such  a  case  be  given  by  law  without 
the  aid  of  a  contract.  But  the  liability  of  the  individual  citizen  must 
arise  from  a  contract  binding  him  to  pay. 

3.     Advertisements  Distinguished  from  Offers. 

Moid  ton  V.  Kershaw.  59  Wis.  j/d. 

Kershaw  &  Son  wrote  to  Moulton :  "We  are  authorized  to 
offer  Michigan  Fine  Salt,  in  full  car  load  lots  of  80-95  barrels," 
on  certain  terms.  Moulton  replied,  "You  may  ship  me  2,000  bar- 
rels Michigan  Fine  Salt  as  offered  in  your  letter."  He  now  seeks 
to  enforce  the  contract. 

Held,  that  the  language  of  the  letter  was  that  of  an  advertise- 
ment, and  not  of  an  offer. 


1 8  COMMERCIAL   LAW    CASES 

Taylor,  J. 

If  the  letter  of  the  appellants  is  an  ofifer  to  sell  salt  to  the 
respondent  on  the  terms  stated,  then  it  must  be  held  to  be  an  offer  to 
sell  any  quantity  at  the  option  of  the  respondent  not  less  than  one  car- 
load. Rather  than  introduce  such  an  element  of  uncertainty  into  the 
contract,  we  deem  it  much  more  reasonable  to  construe  the  letter  as 
a  simple  notice  to  those  dealing  in  salt  that  the  appellants  were  in  a 
condition  to  supply  that  article  for  the  prices  named,  and  requesting 
the  person  to  whom  it  was  addressed  to  deal  with  them.  This  case 
is  one  where  it  is  eminently  proper  to  heed  the  injunction:  "That  care 
should  always  be  taken  not  to  construe  as  an  agreement  letters  which 
Ihe  parties  intended  only  as  preliminary  negotiations." 

We  do  not  wish  to  be  understood  as  holding  that  a  party  may  not 
be  bound  by  an  offer  to  sell  personal  property,  where  the  amount  or 
quantity  is  left  to  be  fixed  by  the  person  to  whom  the  offer  is  made, 
when  the  offer  is  accepted  and  the  amount  or  quantity  fixed  before 
the  offer  is  withdrawn.  We  simply  hold  that  the  letter  of  the  appel' 
lants  in  this  case  was  not  such  an  offer.  If  the  letter  had  said  to  the 
respondent,  we  will  sell  you  all  the  Michigan  Fine  Salt  you  will  order, 
at  the  price  and  on  the  terms  named,  then  it  is  undoubtedly  the  law 
that  the  appellants  would  have  been  bound  to  deliver  any  reasonable 
amount  the  respondent  might  have  ordered,  possibly  any  amount. 

We,  however,  place  our  opinion  upon  the  language  of  the  letter 
of  the  appellants,  and  hold  that  it  cannot  be  fairly  construed  into  an 
offer  to  sell  to  the  respondent  any  quantity  of  salt  he  might  order,  nor 
any  reasonable  amount  he  might  see  fit  to  order.  The  language  is  not 
such  as  a  business  man  would  use  in  making  an  offer  to  sell  to  an 
individual  a  definite  amount  of  property.  The  word  "sell"  is  not  used. 
They  say,  "We  are  authorized  to  offer  Michigan  fine  salt,"  etc.,  and 
volunteer  an  opinion  that  at  the  terms  stated  it  is  a  bargain.  They 
do  not  say.  we  offer  to  sell  to  you.  They  use  general  language  proper 
to  be  addressed  generally  to  those  who  are  interested  in  the  salt  trade. 
It  is  clearly  in  the  nature  of  an  advertisement  or  business  circular,  to 
attract  the  attention  of  those  interested  in  that  business  to  the  fact 
that  good  bargains  in  salt  could  be  had  by  applying  to  them,  and  not 
an  offer  by  which  they  were  to  be  bound,  if  accepted,  for  any  amount 
the  persons  to  whom  it  was  addressed  might  see  fit  to  order. 

4.     Uncompleted  Negotiations. 

Mayer  v.  McCrcery.  //p  A''.  Y.  4^4. 

Mayer  wrote  to  the  defendant,  McCreery,  "I  will  take  your 
building,  483  Fifth  Avenue,  on  a  twenty-one  years'  lease  from 
May  I,  1895,  to  be  altered  by  you  similar  to  one  Hume  &  Co.  is 
now  altering,  and  floors,  etc.,  arranged  as  spoken  about,  etc.,  at 
the  yearly  rent  of  $5,250  for  each  year  of  the  term,  net  rent,  no 
taxes,  assessments,  etc.     Plans,  etc..  to  be  mutually  agreed  upon." 


FORMATION    OF    CONTRACTS  I9 

McCreer}^  replied,  "I  hereby  accept  your  offer."  Four  days  later 
he  wrote  to  Mayer,  "The  proposed  lease  cannot  and  will  not  be 
made."     Mayer  now  seeks  to  enforce  the  agreement. 

Held,  that  no  contract  was  formed  by  these  negotiations. 

Peckham,  J. 

It  is,  in  substance,  an  agreement  that  if  the  parties  shall  thereafter 
agree  upon  plans  for  the  alteration  of  the  building,  that  thereupon  a 
lease  of  the  building  upon  the  terms  specified  in  the  letters  will  be 
given  by  the  defendant  to  the  plaintiff.  The  whole  language  is  con- 
ditional ;  the  making  of  the  lease  is  plainly  based  upon  the  condition 
that  an  agreement  shall  be  arrived  at  between  the  parties  as  to  the 
plans  and  scope  of  the  alterations  which  are  to  be  thereafter  made  by 
the  defendant.  It  is  conceded  that  no  such  agreement  was  ever  made. 
We  think  it  was  entirely  immaterial  what  reason  was  given  by  the 
defendant  for  or  what  motive  actuated  him  in  his  refusal  to  make  the 
lease.  He  had  agreed  to  make  it  only  provided  the  parties  thereafter 
agreed  upon  the  plans  and  alterations  to  be  made,  and  if  no  such 
agreement  were  arrived  at,  there  was  necessarily  no  lease. 

We  do  not  think  it  is  a  case  where  the  plaintiff  might  waive  the 
condition  for  making  the  alterations  and  demand  a  lease  without  such 
agreement  having  been  arrived  at.  The  defendant  has  agreed  that 
he  would  give  a  lease,  provided  he  and  the  plaintiff"  should  subse- 
quently agree  upon  plans  for  alterations  to  be  made.  But  he  was 
under  no  obligation  to  agree  upon  such  plans.  On  the  contrary  he 
might  arbitrarily  refuse  to  agree  upon  them  and  his  refusal  would 
be  a  sufficient  answer  to  the  demand  for  the  execution  of  the  lease. 
It  would  be  no  answer  for  the  plaintiff  to  show  that  he  had  offered 
to  agree  on  plans  which  were  reasonable  and  proper,  but  that  the 
defendant  had,  without  reason,  refused  to  agree  upon  them.  It  did 
not  belong  to  that  class  of  agreements  where  one  party  agrees  to 
do  work  to  the  satisfaction  of  another,  and  in  which  the  court  holds 
the  other  should,  as  a  matter  of  law,  be  satisfied  with  upon  proof  that 
it  would  be  utterly  unreasonable  not  to  be  so  satisfied.  Here  the 
condition  whether  there  was  to  be  a  lease  executed  depended  wholly 
upon  the  fact  of  the  agreement  thereafter  to  be  made  between  the 
parties  as  to  plans  for  the  alteration  of  the  building.  In  this  instance 
the  parties  did  agree,  the  one  to  lease  and  the  other  to  receive  the 
lease  upon  certain  conditions  to  be  thereafter  mutually  agreed  upon. 
Those  conditions  never  were  thereafter  mutually  agreed  upon,  and 
hence  no  right  to  claim  the  lease  ever  existed.  The  motives  of  the 
defendant  for  his  refusal  are  wholly  immaterial. 

5.     Indications  of  Intention. 

Farina  V.  Fickus.  L.  R.  (igoo)  i  Ch.  (Eng.)  JJJ. 

Farina  married  Miss  Fickus  after  correspondence  with  her 
father,  in  which  the  father  gave  his  consent  to  the  marriage,  and 


20  COMMERCIAL    LAW    CASES 

Stated  that  his  daughter  should  have  a  share  of  what  he  left,  after 
the  death  of  her  mother.  The  Farinas  contend  that  the  marriage 
following  this  statement  was  an  acceptance  of  an  offer,  and  that 
the  marriage  was  made  pursuant  thereto. 

Held,  that  a  statement  of  intention  is  not  an  oft'er. 

Cosens-Hardy,  J. 

A  mere  representation  that  the  writer  intends  to  do  something:  in 
the  future  is  not,  though  the  person  to  whom  it  is  made  relies  upon 
it,  sufficient  to  entitle  that  person  to  obtain  specific  performance  or 
damages.  There  must  be  a  contract  in  order  to  entitle  the  party  to 
obtain  any  relief.  The  material  words  in  the  letter  are  these :  "You 
are  of  course  aware  that  with  my  large  family  Eliza  will  have  little 
fortune.  She  will  have  a  share  of  what  I  leave  after  the  death  of 
her  mother,  whom  I  wish  to  leave  in  comfortable  independence  if  I 
should  leave  her  a  widow."  The  plaintiff's  contention  is  that  the  true 
meaning  and  effect  of  the  letter  is  this:  "If  you,  Mr.  Farina,  will  make 
a  settlement  on  my  daughter  before  her  marriage,  I  will  give  my 
assent,  and — subject  only  to  the  rights  of  my  widow,  as  to  which  I 
reserve  myself  a  free  hand — I  will  bind  myself  to  leave  her  by  my 
will  an  equal  share  with  all  my  other  surviving  children  in  my  prop- 
erty, subject  only  to  debts  and  testamentary  expenses."  Upon  consid- 
eration, I  cannot  bring  myself  to  believe  that  this  is  the  true  effect 
of  the  letter.  I  regard  it  as  in  no  sense  a  proposal  or  offer,  but  rather 
as  a  representation  that  the  testator  was  not  in  a  position  to  make  any 
proposal  or  to  give  his  daughter  anytiiing  at  the  time,  but  that  he 
intended  to  give  her  something  at  his  death.  I  do  not  regard  it  as  an 
offer  resulting  in  a  contract  by  the  testator. 

6.    Vague  Agreements. 

Varney  v.  Dittnars.  21"/  N.  Y.  22^. 

Varney  and  Ditmars  made  an  agreement  whereby  Ditmars 
should  pay  Varney,  an  architect  emj^loyed  by  him,  a  fair  share  of 
the  profits  of  his  business.  Varney  was  subsequently  discharged, 
and  sues  for  a  share  of  the  profits. 

Ucld,  that  an  agreement  to  give  a  fair  share  of  profits  is  too 
vague  and  indefinite  to  be  the  basis  of  a  contract. 

Chase,  J . 

The  statement  alleged  to  have  been  made  by  the  defendant  about 
giving  the  i)laintiff  and  said  designer  a  fair  share  of  his  profits  is 
vague,  indefinite  and  uncertain,  and  the  amount  cannot  be  computed 
from  anything  that  was  said  by  the  parties  or  by  reference  to  any 
document,  pajjcr  or  other  transaction.  The  minds  of  the  parties  never 
met  upon  any  particular  share  of  the  defendant's  profits  to  be  given 
the  cmi)]oyces  or  upon  any  plan  by  which  such  share  could  be  com- 


FORMATION    OF    CONTRACTS  21 

puted  or  determined.  The  contract  so  far  as  it  related  to  the  special 
promise  or  inducement  was  never  consummated.  It  was  left  subject 
to  the  will  of  the  defendant  or  for  further  negotiations.  It  is  urged 
that  the  defendant  by  the  use  of  the  word  "fair"  in  referring  to  a 
share  of  his  profits,  was  as  certain  and  definite  as  people  are  in  the 
purchase  and  sale  of  a  chattel  when  the  price  is  not  expressly  agreed 
upon,  and  that  if  the  agreement  in  question  is  declared  to  be  too 
indefinite  and  uncertain  to  be  enforced  a  similar  conclusion  must  be 
reached  in  every  case  where  a  chattel  is  sold  without  expressly  fixing 
the  price  therefor. 

The  question  whether  the  words  "fair"  and  "reasonable"  have 
a  definite  and  enforceable  meaning  when  used  in  business  transactions 
is  dependent  upon  the  intention  of  the  parties  in  the  use  of  such  words 
and  upon  the  subject  matter  to  which  they  refer.  In  cases  of  mer- 
chandising and  in  the  purchase  and  sale  of  chattels  the  parties  may 
use  the  words  "fair  and  reasonable  value"  as  synonymous  with  "mar- 
ket value."  A  promise  to  pay  the  fair  market  value  of  goods  may  be 
inferred  from  what  is  expressly  agreed  by  the  parties.  The  fair, 
reasonable  or  market  value  of  goods  can  be  shown  by  direct  testimony 
of  those  competent  to  give  such  testimony. 

Such  contracts  are  common,  and  when  there  is  nothing  therein  to 
limit  or  prevent  an  implication  as  to  the  price,  they  are,  so  far  as  the 
terras  of  the  contract  are  concerned,  binding  obligations. 

The  contract  in  question,  so  far  as  it  relates  to  a  share  of  the 
defendant's  profits,  is  not  only  uncertain  but  it  is  necessarily  affected 
by  so  many  other  facts  that  are  in  themselves  indefinite  and  uncertain 
that  the  intention  of  the  parties  is  pure  conjecture.  A  fair  share  of 
the  defendant's  profits  may  be  any  amount  from  a  nominal  sum  to  a 
material  part  according  to  the  particular  views  of  the  person  whose 
guess  is  considered.  Such  an  executory  contract  must  rest  for  per- 
formance upon  the  honor  and  good  faith  of  the  parties  making  it. 
The  courts  cannot  aid  parties  in  such  a  case  when  they  are  unable  or 
unwilling  to  agree  upon  the  terms  of  their  own  proposed  contract. 

It  is  elementary  in  the  law  that,  for  the  validity  of  a  contract,  the 
promise,  or  the  agreement,  of  the  parties  to  it  must  be  certain  and 
explicit  and  that  their  full  intentions  may  be  ascertained  to  a  reason- 
able degree  of  certainty.  Their  agreement  must  be  neither  vague  nor 
indefinite. 

7.     Notice  of  Revocation. 

Braucr  v.  Shaiv.  i68  Mass.  198. 

The  defendants  telegraphed  at  11:30  A.  M.  from  Boston, 
offering  to  let  to  the  plaintiffs  the  space  on  the  Warren  line  of 
steamships  during  the  month  of  May,  for  the  carriage  of  cattle 
from  Boston  to  Liverpool  at  so  much  per  head.  The  telegram 
was  received  by  the  plaintiffs  in  New  York  at  12:16  and  at  12:28 
a  reply  was  sent  accepting  the  offer.     This  reply  was  not  received 


22  COMMERCIAL    LAW    CASES 

until  I  :20.  At  i  :oo  the  defendants  telegraphed  revoking  their 
offer,  the  message  being  received  in  New  York  at  i  :43.  The 
plaintiffs  seek  to  hold  the  defendants  to  the  contract. 

Held,  that  revocation  of  an  offer  does  not  become  effective 
until  it  is  received. 

Holmes,  J. 

There  is  no  doubt  that  the  reply  was  handed  to  the  telegraph 
company  promptly,  and  at  least  it  would  have  been  open  to  a  jury  to 
find  that  the  plaintiffs  had  done  all  that  was  necessary  on  their  part 
to  complete  the  contract.  If  then  the  offer  was  outstanding  when  it 
was  accepted,  the  contract  was  made.  But  the  offer  was  outstanding. 
At  the  time  when  the  acceptance  was  received,  even,  the  revocation 
of  the  offer  had  not  been  received.  It  seems  to  us  a  reasonable  re- 
quirement that,  to  disable  the  plaintiffs  from  accepting  their  offer,  the 
defendants  should  bring  home  to  them  actual  notice  that  it  had  been 
revoked.  By  their  choice  and  act  they  brought  about  a  relation  be- 
tween themselves  and  the  plaintiffs  which  the  plaintiffs  could  turn 
into  a  contract  by  an  act  on  their  part  and  authorized  the  plaintiffs 
to  understand  and  to  assume  that  that  relation  existed.  When  the 
plaintiffs  acted  in  good  faith  on  the  assumption,  the  defendants  could 
not  complain.  Knowingly  to  lead  a  person  reasonably  to  suppose 
that  you  offer  and  to  offer  are  the  same  thing.  The  offer  must  be 
made  before  the  acceptance,  and  it  does  not  matter  whether  it  is  made 
a  longer  or  shorter  time  before,  if  by  its  express  or  implied  terms  it 
is  outstanding  at  the  time  of  the  acceptance.  Whether  much  or  little 
time  has  intervened,  it  reaches  forward  to  the  moment  of  acceptance 
and  speaks  then.  It  would  be  monstrous  to  allow  an  inconsistent  act 
of  the  offerer,  not  known  or  brought  to  the  notice  of  the  offeree,  to 
affect  the  making  of  the  contract. 

8.     Revocation  by  Death  of  Offerer. 

Jordan  v.  Dobbins'  Adm.  122  Mass.  168. 

Dobbins  agreed  with  Jordan,  Marsh  &  Company,  to  guarantee 
the  payment  of  all  goods  which  the  said  company  should  sell 
Moore  until  Dobbins  should  notify  them  to  the  contrary.  Notice 
of  acceptance  of  the  guaranty  was  waived.  Dobbins  died.  Later 
Jordan,  Marsh  &  Company  sold  goods  to  Moore,  not  knowing  of 
the  death  of  Dobbins.     They  sue  to  recover  on  the  guaranty. 

Held,  that  until  a  guaranty,  in  reality  a  continuing  offer,  is 
acted  upon,  it  imposes  no  obligation  and  creates  no  liability  on  the 
guarantor. 

Morton,  J. 

The  agreement  which  the  guarantor  makes  with  the  person 
receiving  tlie  guaranty  is  not  tliat  I   now  become  liable  to  you   for 


FORMATION   OF    CONTRACTS  2^ 

anything,  but  that  if  you  sell  goods  to  a  third  person,  I  will  then 
become  liable  to  pay  for  them  if  such  third  person  does  not.  It  is  of 
the  nature  of  an  authority  to  sell  goods  upon  the  credit  of  the  guar- 
antor, rather  than  of  a  contract  which  cannot  be  rescinded  except 
by  mutual  consent.  Thus  such  a  guaranty  is  revocable  by  the  guar- 
antor at  any  time  before  it  is  acted  upon. 

Such  being  the  nature  of  a  guaranty,  we  are  of  the  opinion  that 
the  death  of  the  guarantor  operates  as  revocation  of  it,  and  that  the 
person  holding  it  cannot  recover  against  his  executor  or  administrator 
for  goods  sold  after  the  death.  Death  terminates  the  power  of  the 
deceased  to  act,  and  revokes  any  authority  or  license  he  may  have 
given,  if  it  has  not  been  executed  or  acted  upon.  His  estate  is  held 
upon  any  contract  upon  which  a  liability  exists  at  the  time  of  his 
death,  although  it  may  depend  upon  future  contingencies.  But  it  is 
not  held  for  a  liability  which  is  created  after  his  death,  by  the  exer- 
cise of  a  power  or  authority  which  he  might  at  any  time  revoke. 

g.     Sealed  Offers.     (Majority  Rule.) 

O'Brien  z:  Boland.  i66  Mass.  481. 

Boland  made  an  offer  under  seal  to  O'Brien,  to  sell  property 
owned  by  Boland  at  any  time  within  ten  days  for  a  specified  price. 
Three  days  later  he  notified  O'Brien  that  he  withdrew  the  offer. 
Four  days  thereafter  O'Brien  accepted  the  offer,  and  sues  to  en- 
force the  contract. 

Held,  that  the  offer  under  seal  could  not  be  revoked  prior  to 
the  time  of  its  expiration. 

Barker,  J. 

In  the  present  case,  because  the  offer  was  under  seal,  it  was  an 
irrevocable  covenant,  conditional  upon  acceptance  within  ten  days, 
and  the  written  acceptance  within  that  time  made  it  a  mutual  contract 
which  the  plaintiff  can  enforce.  The  plaintiff  might  have  assented 
to  the  withdrawal,  and  the  offer  would  have  been  at  an  end.  But  he 
was  not  bound  to  assent,  and  could  treat  the  withdrawal  as  inoperative. 

10.     Revocation  of  Offer  to  Public  in  Manner  of  Offer. 
Shiiey  V.  United  States.     g2  U.  S.  /j. 

On  April  20,  1865,  the  Secretary  of  War  published  in  the 
newspapers,  and  otherwise,  a  proclamation  announcing  a  reward 
of  $25,000  for  the  apprehension  of  John  H,  Surratt,  one  of 
Booth's  accomplices,  and  a  reward  for  any  information  that 
should  conduce  to  the  arrest  of  either  Surratt  or  Booth,  or  their 
accomplices.  On  November  24,  1865,  the  President  caused  to  be 
published  his  order  revoking  the  reward  offered  for  the  arrest  of 


24  COMMERCIAL   LAW    CASES 

Surratt.  Ste.  Marie,  in  ignorance  of  the  withdrawal  of  the 
offer,  gave  information  which  led  to  the  arrest  of  Surratt,  who 
was  in  the  military  service  of  the  Papal  government  as  a  Zouave. 
His  executor  seeks  to  recover  the  reward. 

Held,  that  the  revocation  was  effective,  although  the  service 
was  rendered  without  knowledge  thereof. 

Strong,  J. 

It  is  not  to  be  doubted  that  the  offer  was  revocable  at  any  time 
before  it  was  accepted,  and  before  anything  had  been  done  in  reliance 
upon  it.  There  was  no  contract  until  its  terms  v/ere  complied  with. 
Like  any  other  offer  of  a  contract,  it  might,  therefore,  be  withdrawn 
before  rights  had  accrued  under  it ;  and  it  was  withdrawn  through  the 
same  channel  in  which  it  was  made.  The  same  notoriety  was  given 
to  the  revocation  that  was  given  to  the  offer;  and  the  findings  of  fact 
do  not  show  that  any  information  was  given  by  the  claimant,  or  that 
he  did  anything  to  entitle  him  to  the  reward  offered,  until  five  months 
after  the  offer  had  been  withdrawn.  True,  it  is  found  that  then,  and 
at  all  times  until  the  arrest  was  actually  made,  he  was  ignorant  of  the 
withdrawal ;  but  that  is  an  immaterial  fact.  The  offer  of  the  reward 
not  having  been  made  to  him  directly,  but  by  means  of  a  published 
proclamation,  he  should  have  known  that  it  could  be  revoked  in  the 
manner  in  which  it  was  made. 

II.    Revocation  by  Lapse  of  Time. 

Loring  v.  City  of  Boston.  7  Mete.  {Mass.)  40Q. 

Loring  sues  the  city  of  Boston  to  recover  a  reward  offered 
by  the  city  for  the  apprehension  and  conviction  of  any  person 
setting  fire  to  any  building  within  the  city  limits.  The  offer  was 
never  withdrawn.  Three  years  and  eight  months  after  the  appear- 
ance of  the  offer,  an  incendiary  set  fire  to  a  building.  He  was 
apprehended  and  convicted  through  the  efforts  of  Loring. 

Held,  that  the  offer  had  been  revoked  by  lapse  of  time. 

Shaw,  C.  J. 

By  fair  implication,  there  must  be  some  limit  to  this  offer,  and 
there  being  no  limit  in  terms,  then  by  a  general  rule  of  law  it  must  be 
limited  to  a  reasonable  time  after  the  offer  was  made. 

Every  consideration  arising  from  the  nature  of  the  case  confirms 
the  belief  that  such  offer  of  reward,  for  a  special  service  of  this  nature, 
is  not  unHmited  and  perpetual  in  its  duration,  but  must  be  limited  to 
some  reasonable  time.  The  difficulty  is  in  fixing  it.  One  circum- 
stance, perhaps  a  slight  one,  is,  that  the  act  is  done  by  a  board  of 
officers  who  themselves  are  annual  officers.  But  as  they  act  for  the 
city,  which  is  a  permanent  body,  and  exercise  its  authority  for  the 
time  being,  and  as  such  a  reward  might  be  offered  near  the  end  of 


FORMATION    OF    CONTRACTS  25 

the  year,  we  cannot  necessarily  limit  it  to  the  time  for  which  the  same 
board  of  mayor  and  aldermen  have  to  serve ;  though  it  tends  to  mark 
the  distinction  between  a  temporary  act  of  one  branch  and  a  permanent 
act  of  the  whole  city  government. 

We  have  already  alluded  to  the  fact  of  the  discontinuance  of  the 
advertisement  as  one  of  some  weight.  It  is  some  notice  to  the  public 
that  the  exigency  has  passed,  for  which  such  offer  of  a  reward  was 
particularly  intended.  And  though  such  discontinuance  is  not  a  revo- 
cation of  the  offer,  it  proves  that  those  who  made  it  no  longer  hold  it 
forth  conspicuously  as  a  continuing  offer ;  and  it  is  not  reasonable  to 
regard  it  as  a  continuing  offer  for  any  considerable  term  of  time 
afterwards. 

But  it  is  not  necessary,  perhaps  not  proper,  to  undertake  to  fix  a 
precise  time  as  reasonable  time ;  it  must  depend  on  many  circum- 
stances. 

Under  the  circumstances  of  the  present  case,  the  court  are  of 
opinion  that  three  years  and  eight  months  is  not  a  reasonable  time 
within  which,  or  rather  to  the  extent  of  which,  the  offer  in  question 
can  be  considered  as  a  continuing  offer  on  the  part  of  the  city. 

B.     Acceptance, 

I.     Communication  of  Acceptance. 

White  V.  Codies.  46  N.  Y.  46/. 

Corlies  &  Company,  after  negotiating  with  White  concerning 
the  fitting  up  of  offices,  wrote  White  that  upon  an  agreement  to 
finish  the  fitting  up  of  these  offices  within  two  weeks  he  could 
begin  work  at  once.  White  purchased  the  lumber  and  began  w^ork 
thereon.  The  next  day  the  order  was  countermanded.  White 
claims  he  had  accepted  the  offer. 

Held,  that  an  acceptance  must  ordinarily  be  communicated. 

Folger,  J. 

We  understand  the  rule  to  be,  that  where  an  offer  is  made  by  one 
party  to  another  when  they  are  not  together,  the  acceptance  of  it  by 
that  other  must  be  manifested  by  some  appropriate  act.  It  does  not 
need  that  the  acceptance  shall  come  to  the  knowledge  of  the  one 
making  the  offer  before  he  shall  be  bound.  But  though  the  manifesta- 
tion need  not  be  brought  to  his  knowledge  before  he  becomes  bound, 
he  is  not  bound  if  that  manifestation  is  not  put  in  a  proper  way  to  be 
in  the  usual  course  of  events,  in  some  reasonable  time,  communicated 
to  him.  Thus  a  letter  received  by  mail  containing  a  proposal,  may  be 
answered  by  letter  by  mail  containing  an  acceptance.  And  in  general, 
as  soon  as  the  answering  letter  is  mailed,  the  contract  is  concluded. 
Though  one  party  does  not  know  of  the  acceptance,  the  manifestation 
thereof  is  put  in  the  proper  way  of  reaching  him. 


26  COMMERCIAL    LAW    CASES 

In  the  case  in  hand,  the  plaintiff  determined  to  accept.  But  a 
mental  determination  not  indicated  by  speech,  or  put  in  course  of 
indication  by  act  to  the  other  party,  is  not  an  acceptance  which  will 
bind  the  other.  Nor  does  an  act,  which  in  itself  is  no  indication  of  an 
acceptance,  become  such  because  accompanied  by  an  unevinced  mental 
determination.  Where  the  act,  uninterpreted  by  concurrent  evidence 
of  the  mental  purpose  accompanying  it,  is  as  well  referable  to  one 
state  of  facts  as  another,  it  is  no  indication  to  the  other  party  of  an 
acceptance  and  does  not  operate  to  hold  him  to  his  offer. 

Conceding  that  the  testimony  shows  that  the  plaintiff  did  resolve 
to  accept  this  offer,  he  did  no  act  which  indicated  an  acceptance  of  it 
to  the  defendants.  He,  a  carpenter  and  builder,  purchased  the  stuff 
for  the  work.  But  it  was  stuff  as  fit  for  any  other  like  work.  He 
began  work  upon  the  stuff,  but  as  he  would  have  done  for  any 
other  like  work.  There  was  nothing  in  his  thought,  formed  but 
not  uttered,  or  in  his  acts  that  indicated  or  set  in  motion  an  indication 
to  the  defendants  of  his  acceptance  of  their  offer,  or  which  could 
necessarily  result  therein. 

2.     Acceptance  by  Act. 

Carlillv.  The  Carbolic  Smoke  Ball  Co.  (i8p^)  i  Q.B.  (Eng.) 
256. 

The  defendants,  who  were  proprietors  and  vendors  of  a  medical 
preparation  called  the  Carbolic  Smoke  Ball,  inserted  in  the  Pall 
Mall  Gazette  the  following  advertisement :  "One  hundred  pounds 
reward  will  be  paid  by  the  Carbolic  Smoke  Ball  Company  to  any 
person  who  contracts  the  increasing  epidemic  influenza,  colds,  or 
any  disease  caused  by  taking  cold,  after  having  used  the  ball 
three  times  daily  for  two  weeks  according  to  the  printed  directions 
supplied  with  each  ball.  One  thousand  pounds  is  deposited  with 
the  Alliance  Bank,  Regent  Street,  showing  our  sincerity  in  the 
matter."  The  plaintiff,  on  the  faith  of  this  advertisement,  bought 
some  of  the  balls  at  a  druggist's  and  used  them  as  directed,  from 
November  20  to  January  17,  when  she  was  attacked  by  the  influ- 
enza.    She  sues  for  the  reward. 

Held,  that  an  offer  contained  in  an  advertisement  may  be 
accepted  by  the  act  called  for,  without  notice  of  acceptance. 

Lindley,  L.  J. 

In  the  first  place,  it  is  said  that  it  is  not  made  with  anybody  in 
particular.  Now,  that  point  is  common  to  the  words  of  the  advertise- 
ment and  to  the  words  of  all  other  advertisements  offering  rewards. 
They  are  offers  to  anybody  who  performs  the  conditions  named  in 
the  advertisement,  and  anybody  who  does  perform  the  conditions 
acccifts  the  offer.     In  [joint  of  law  this  advertisement  is  an  offer  to 


FORMATION    OF    CONTRACTS  2^ 

pay  one  hundred  pounds  to  anybody  who  will  perform  these  condi- 
tions, and  the  performance  of  the  conditions  is  the  acceptance  of 
the  offer. 

Bowen,  L.  J. 

One  cannot  doubt  that,  as  an  ordinary  rule  of  law,  an  acceptance 
of  an  offer  made  ought  to  be  notified  to  the  person  who  makes  the 
offer  in  order  that  the  two  minds  may  come  together.  Unless  this  is 
done,  the  two  minds  may  be  apart,  and  there  is  no  consensus,  which 
is  necessary  according  to  the  English  law — I  say  nothing  about  the 
laws  of  other  countries — to  make  a  contract.  But  there  is  this  clear 
gloss  to  be  made  upon  that  doctrine,  that  as  notification  of  acceptance 
is  required  for  the  benefit  of  the  person  who  makes  the  offer,  the 
person  who  makes  the  offer  may  dispense  with  notice  to  himself  if 
he  thinks  it  desirable  to  do  so;  and  I  suppose  there  can  be  no  doubt 
that  where  a  person  in  an  offer  made  by  him  to  another  person,  ex- 
pressly or  impliedly  intimates  a  particular  mode  of  acceptance  as  suf- 
ficient to  make  the  bargain  binding,  it  is  only  necessary  for  the  other 
person  to  whom  such  offer  is  made  to  follow  the  indicated  method  of 
acceptance;  and  if  the  person  making  the  offer,  expressly  or  impliedly 
intimates  in  his  offer  that  it  will  be  sufficient  to  act  on  the  proposal 
without  communicating  an  acceptance  of  it  back  again  to  himself, 
performance  of  the  condition  is  a  sufficient  acceptance  without  noti- 
fication. 

Now,  if  that  is  the  law,  how  are  we  to  find  out  whether  the  person 
who  makes  the  offer  does  intimate  that  notification  of  acceptance  will 
not  be  necessary  in  order  to  constitute  a  binding  bargain?  In  many 
cases  you  look  to  the  offer  itself.  In  many  cases  you  extract  from  the 
character  of  the  transaction  that  notification  is  not  required,  and  in 
the  advertisement  cases  it  seems  to  me  to  follow  as  an  inference  to 
be  drawn  from  the  transaction  itself  that  a  person  is  not  to  notify  his 
acceptance  of  the  offer  before  he  performs  the  condition,  but  that  if 
he  performs  the  condition,  notification  is  dispensed  with.  It  seems  to 
me  that  from  the  point  of  view  of  common  sense  no  other  idea  could 
be  entertained.  If  I  advertise  to  the  world  that  my  dog  is  lost,  and 
that  anybody  who  brings  the  dog  to  a  particular  place  will  be  paid 
some  money,  are  all  persons  to  be  expected  to  sit  down  and  write  me 
a  note  saying  that  they  have  accepted  my  proposal?  Why,  of  course, 
they  at  once  look  for  the  dog,  and  as  soon  as  they  find  the  dog,  they 
have  performed  the  condition.  The  essence  of  the  transaction  is  that 
the  dog  should  be  found,  and  it  is  not  necessary  under  such  circum- 
stances, as  it  seems  to  me,  that  in  order  to  make  the  contract  binding 
there  should  be  a  notification  of  acceptance.  It  follows  from  the 
nature  of  the  thing  that  the  performance  of  the  conditions  is  suffi- 
cient acceptance  without  the  notification  of  it,  and  a  person  who  makes 
an  offer  in  an  advertisement  of  that  kind  makes  an  offer  which  must 
be  read  by  the  light  of  that  common  sense  reflection.  He  does,  there- 
fore, in  his  offer  impliedly  indicate  that  he  does  not  require  notifica- 
tion of  the  acceptance  of  the  offer. 


28  COMMERCIAL    LAW    CASES 

3.     When  Acceptance  Takes  Place. 

Tayloe  v.  The  Merchants'  Fire  Insurance  Co.  9  How.  {U.  S.) 
390- 

Tayloe  applied  for  insurance  with  the  defendant  company, 
which  stated  terms  and  asked  for  a  check  to  conclude  the  matter 
in  case  he  accepted.  On  the  20th  of  December  he  mailed  a  letter 
expressing  his  assent  to  the  terms  and  enclosing  a  check.  On  the 
22nd,  one  of  the  insured  buildings  was  burned.  On  the  31st  the 
letter  of  acceptance  was  received. 

Hchi,  that  this  was  a  binding  contract,  as  acceptance  dates  from 
the  time  of  mailing  it. 

Nelson,  J. 

An  offer  under  the  circumstances  stated,  prescribing  the  terms 
of  insurance,  is  intended,  and  is  to  be  deemed  a  valid  undertaking  on 
the  part  of  the  company  that  they  will  be  bound  according  to  the 
terms  tendered,  if  an  answer  is  transmitted  in  due  course  of  mail, 
accepting  them;  and  that  it  cannot  be  withdrawn,  unless  the  with- 
drawal reaches  the  party  to  whom  it  is  addressed  before  his  letter  of 
reply  announcing  the  acceptance  has  been  transmitted. 

This  view  of  the  effect  of  the  correspondence  seems  to  us  to  be 
but  carrying  out  the  intent  of  the  parties,  as  plainly  manifested  by 
their  acts  and  declarations. 

On  the  acceptance  of  the  terms  proposed,  transmitted  by  due 
course  of  mail  to  the  company,  the  minds  of  both  parties  have  met  on 
the  subject  in  the  mode  contemplated  at  the  time  of  entering  upon 
the  negotiation,  and  the  contract  becomes  complete.  The  party  to 
whom  the  proposal  is  addressed  has  a  right  to  regard  it  as  intended 
as  a  continuing  offer  until  it  shall  have  reached  him,  and  shall  be  in 
due  time  accepted  or  rejected. 

Such  is  the  plain  import  of  the  offer.  And  besides,  upon  any 
other  view  the  proposal  amounts  to  nothing,  as  the  acceptance  would 
be  but  the  adoption  of  the  terms  tendered,  to  be  in  turn  proposed  by 
the  ajjplicant  to  the  company  for  their  approval  or  rejection.  For, 
if  the  contract  is  still  open  until  the  company  is  advised  of  an 
acceptance,  it  follows,  of  course,  that  the  accei)tance  may  be  repu- 
diated at  any  time  before  the  notice  is  received.  Nothing  is  effectually 
accomplished  by  an  act  of  acceptance. 

It  is  apparent,  therefore,  that  such  an  interpretation  of  the  acts 
of  the  parties  would  defeat  the  object  which  both  had  in  view  in 
entering  upon  the  correspondence. 

The  fallacy  of  the  argument,  in  our  judgment,  consists  in  the 
assumption  that  the  contract  cannot  be  consummated  without  a  knowl- 
edge on  the  part  of  the  com])any  tliat  the  offer  has  been  accepted. 
This  is  the  point  of  the  objection.  But  a  little  reflection  will  show 
that,  in  all  cases  of  contracts  entered  into  between  parties  at  a  dis- 


FORMATION    OF    CONTRACTS  2g 

tance  by  correspondence,  it  is  impossible  that  both  should  have  a 
knowledge  of  it  the  moment  it  becomes  complete.  This  can  only  exist 
where  both  parties  are  present. 

The  negotiation  being  carried  on  through  the  mail,  the  offer  and 
acceptance  cannot  occur  at  the  same  moment  of  time ;  nor,  for  the 
same  reason,  can  the  meeting  of  the  minds  of  the  parties  on  the  subject 
be  known  to  each  at  the  moment  of  concurrence ;  the  acceptance  must 
succeed  the  offer  after  the  lapse  of  some  interval  of  time;  and,  if  the 
process  is  to  be  carried  farther  in  order  to  complete  the  bargain,  and 
notice  of  the  acceptance  must  be  received,  the  only  effect  is  to  reverse 
the  position  of  the  parties,  changing  the  knowledge  of  the  completion 
from  the  one  party  to  the  other. 

It  is  obviously  impossible,  therefore,  under  the  circumstances 
stated,  ever  to  perfect  a  contract  by  correspondence,  if  a  knowledge 
of  both  parties  at  the  moment  they  become  bound  is  an  essential  ele- 
ment in  making  out  the  obligation.  And  as  it  must  take  effect,  if 
effect  is  given  at  all  to  an  endeavor  to  enter  into  a  contract  by  cor- 
respondence, in  the  absence  of  the  knowledge  of  one  of  the  parties  at 
the  time  of  its  consummation,  it  seems  to  us  more  consistent  with  the 
acts  and  declarations  of  the  parties  to  consider  it  complete  on  the 
transmission  of  the  acceptance  of  the  offer  in  the  way  they  themselves 
contemplated;  instead  of  postponing  its  completion  till  notice  of  such 
acceptance  has  been  received  and  assented  to. 

The  unqualified  acceptance  by  the  one  of  the  terms  proposed  by 
the  other,  transmitted  by  due  course  of  mail,  is  regarded  as  closing 
the  bargain  from  the  time  of  the  transmission  of  the  acceptance. 

4.    Acceptance  to  Place  Specified. 

Eliason  v.  Hcnshaw.  4  Wheat.  {U.  S.)  22^. 

Eliason  and  others  offered  to  buy  from  Henshaw  two  or  three 
hundred  barrels  of  fiour  to  be  delivered  at  Georgetown  by  water 
for  $9.50  per  barrel.  They  requested  in  a  postscript  that  Henshaw 
should  write  by  return  of  wagon  whether  the  oifer  was  accepted 
and  sent  the  offer  by  a  wagon  hauling  flour  in  Henshaw's  service 
from  his  mill  to  Harper's  Ferry,  near  which  tl^^e  defendants  then 
were.  Henshaw  replied  by  mail  to  Georgetc  n  accepting  the 
offer  and  now  sues  on  the  contract. 

Held,  that  there  was  no  contract,  as  the  accefitance  was  not  in 
the  manner  and  at  the  place  specified  in  the  ofier. 

Washington,  J. 

It  is  an  undeniable  principle  of  the  law  of  contracts,  that  an  offer 
of  a  bargain  by  one  person  to  another  imposes  10  obligation  upon 
the  former  until  it  is  accepted  by  the  latter,  according  to  the  terms  in 
which  the  offer  was  made.  Any  qualification  of,  or  departure  from, 
those  terms  invalidates  the  offer,  unless  the  same  be  agreed  to  by  the 
person  who  made  it.    Until  the  terms  of  the  agreement  have  received 


30  COMMERCIAL    LAW    CASES 

the  assent  of  both  parties,  the  negotiation  is  open  and  imposes  no 
obligation  upon  either. 

It  appears  that  no  answer  to  this  letter  was  at  any  time  sent  to 
Harper's  Ferry.  Their  offer,  it  is  true,  was  accepted  by  the  terms  of 
a  letter  addressed  "Georgetown,"  and  received  at  that  place ;  but  an 
acceptance  communicated  at  a  place  different  from  that  pointed  out 
by  the  offerers,  and  forming  a  part  of  their  proposal,  imposed  no 
obligation  binding  upon  them  unless  they  had  acquiesced  in  it,  which 
they  declined  doing. 

It  is  no  argument,  that  an  answer  was  received  at  Georgetown; 
the  [offerers]  had  a  right  to  dictate  the  terms  upon  which  they  would 
purchase  the  flour,  and  unless  they  were  complied  with,  they  were  not 
bound  by  them.  All  their  arrangements  may  have  been  made  with  a 
view  to  the  circumstance  of  place,  and  they  were  the  only  judges 
of  its  importance.  There  was,  therefore,  no  contract  concluded 
between  these  parties. 


5.     Acceptance  in  Manner  Implied. 

Lucas  V.  The  Western  Union  Tel.  Co.  i^i  la.  66p. 

Lucas  had  been  negotiating  for  an  exchange  of  property  with 
Sas,  and  had  received  an  offer  by  mail  from  Sas  which  he  accepted 
by  telegraph,  instead  of  by  mail.  The  telegram  was  delayed  by 
the  company,  and  was  not  received  until  Sas  had  revoked  his 
offer.  This  suit  is  brought  against  the  defendant  for  delay  in 
transmission  of  the  telegram  on  the  contention  of  the  plaintiff  that 
he  had  thereby  lost  the  contract  with  Sas. 

Held,  that  acceptance  must  be  by  the  agency  implied;  otherwise 
it  will  not  take  effect  until  it  is  received. 

Ladd,  J. 

The  proposition  of  an  exchange  was  made  to  the  plaintiff  by  let- 
ter. In  committing  it,  properly  addressed  to  the  mails  for  transmission, 
the  post  office  became  the  agent  of  Sas  to  carry  the  offer,  he  taking 
the  chances  of  delays  in  transmission.  Having  sent  tlie  proposition 
by  mail  he  impliedly  authorized  its  acceptance  through  the  same 
agency.  Such  implication  arises  (i)  when  the  post  is  used  to  make 
the  offer  and  no  other  mode  is  suggested,  (2)  when  the  circumstances 
are  such  that  it  must  have  been  within  the  contemplation  of  the 
parties  that  the  post  would  be  used  in  making  the  answer.  The  con- 
tract is  coni]jlcte  in  such  a  case  when  the  letter  containing  the  accep- 
tance is  properly  addressed  and  deposited  in  the  United  States  mails. 
This  is  on  the  ground  that  the  offerer,  by  depositing  this  letter  in 
the  post  office,  selects  a  common  agency  through  which  to  conduct  the 
negotiations  and  the  delivery  of  the  letter  to  it  is  in  effect  a  delivery 
to  the  offerer.    Thereafter  the  acceptor  has  no  right  to  the  letter  and 


FORMATION    OF    CONTRACTS  3 1 

cannot  withdraw  it  from  the  mails.  Even  if  he  should  succeed  in 
doing  so,  the  withdrawal  will  not  invalidate  the  contract  previously 
entered  into. 

But  the  plaintiff  did  not  adopt  this  course.  On  the  contrary,  he 
chose  to  indicate  his  acceptance  by  transmitting  a  telegram  to  Sas  by 
the  defendant  company.  Sas  had  done  nothing  to  indicate  his  willing- 
ness to  adopt  such  agency,  and  the  defendant  in  undertaking  to  trans- 
mit the  message  was  acting  solely  as  the  agent  of  the  plaintiff.  The 
latter  might  have  withdrawn  the  message  or  stopped  its  delivery  at  any 
time  before  it  actually  reached  Sas.  It  is  manifest  that  handing  the 
message  to  his  own  agent  was  not  notice  to  the  sendee  of  the  telegram. 
The  most  formal  declaration  of  an  intention  of  acceptance  of  an  offer 
to  a  third  person  will  not  constitute  a  contract.  A  written  letter  or 
telegram,  like  an  oral  acceptance,  must  be  communicated  to  the  party 
who  has  made  the  offer  or  to  some  one  expressly  or  impliedly  author- 
ized to  receive  it,  and  this  rule  is  not  complied  with  by  delivering  it 
to  the  writer's  own  agent  or  messenger  even  with  direction  to  deliver 
to  the  offerer. 

The  party  making  the  offer  may  be  entirely  satisfied  to  trust  the 
mails,  and  not  be  willing  to  chance  the  use  of  the  telegraph. 

It  is  very  evident  on  authority  and  principle  that,  in  the  absence 
of  any  suggestion,  one  transmitting  an  offer  by  mail  cannot  be  bound 
by  an  acceptance  returned  in  some  other  way  until  it  is  received  or 
he  has  notice  thereof. 

The  plaintiff,  then,  did  not  accept  the  offer  of  Sas  until  the  tele- 
gram was  received  by  the  latter,  a  few  minutes  after  6  P.  M.  of  the 
day  after  the  letter  had  been  received. 


6.    Necessity  of  Unconditional  Acceptance. 

Poel  V.  Brunswick-Balke-Collender  Co.  216  N.  Y.  5/0. 

Peel  &  Arnold  attempt  to  hold  the  Brunswick  Company  for 
breach  of  a  contract  alleged  to  have  been  made  by  two  written 
communications.  Poel  &  Arnold  sent  a  form  of  contract  for  the 
sale  of  12  tons  of  rubber  at  $2.42  per  lb.  to  the  Brunswick  Com- 
pany, whose  agent  in  behalf  of  the  defendant  replied  with  an  order 
for  the  amount,  but  added  new  terms,  viz.,  a  condition  that  the 
goods  should  be  delivered  when  specified  and  that  acceptance  of 
the  order  be  acknowledged. 

Held,  that  no  contract  was  made  by  the  conditional  acceptance. 

Seabury,  J. 

The  defendant's  letter  of  April  6th  was  not  an  acceptance  of  this 
offer  made  by  the  plaintiffs  in  their  letter  of  April  4th.  It  was  a 
counter-offer  or  proposition  for  a  contract.  Its  provisions  make  it 
perfectly  clear  that  the  defendant  (i)  asked  the  plaintiff'  to  deliver 


32  COMMERCIAL    LAW    CASES 

rubber  of  a  certain  quality  and  quantity  at  the  price  specified  in 
designated  shipments;  (2)  it  specified  that  the  order  therein  given 
was  conditional  upon  the  receipt  of  its  order  being  promptly  acknowl- 
edged; (3)  upon  a  further  condition  that  the  plaintiff  would  guarantee 
delivery  within  the  time  specified.  It  may  be  urged  that  the  conditions 
specified  in  the  defendant's  order,  that  the  plaintiffs  would  guarantee 
the  delivery  of  the  goods  within  the  time  specified,  added  nothing  of 
substance  to  the  agreement,  because  if  the  offer  was  accepted  the 
acceptance  itself  would  involve  this  obligation  on  the  part  of  the 
plaintiffs.  The  other  condition  specified  by  the  defendant  cannot  be 
disposed  of  in  the  same  manner.  That  provision  of  the  defendant's 
offer  provided  that  the  offer  was  conditional  upon  the  receipt  of  the 
order  being  promptly  acknowledged.  It  embodied  a  condition  that  the 
defendant  had  the  right  to  annex  to  its  offer.  The  import  of  this 
proposal  was  that  the  defendant  should  not  be  bound  until  the  plain- 
tiffs signified  their  assent  to  the  terms  set  forth.  When  this  assent 
was  given  and  the  acknowledgment  made,  this  contract  was  then  to 
come  into  existence,  and  would  be  completely  expressed  in  writing. 
The  plaintiffs  did  not  acknowledge  the  receipt  of  this  order  and  the 
proposal  remained  unaccepted.  As  the  party  making  this  offer  deemed 
this  provision  material  and  as  the  offer  was  made  subject  to  compli- 
ance with  it  by  the  plaintiffs,  it  is  not  for  the  court  to  say  that  it  is 
immaterial.  When  the  plaintiffs  submitted  this  offer  in  their  letter 
of  April  4th  to  the  defendant,  only  one  of  two  courses  of  action  was 
open  to  the  defendant.  It  could  accept  the  offer  made  and  thus  mani- 
fest that  assent  which  was  essential  to  the  creation  of  a  contract  or 
it  could  reject  the  offer.  There  was  no  middle  course.  If  it  did  not 
accept  the  offer  proposed,  it  necessarily  rejected  it.  A  proposal  to 
accept  the  offer  if  modified  or  an  acceptance  subject  to  other  terms 
and  conditions  was  equivalent  to  an  absolute  rejection  of  the  offer 
made  by  the  plaintiffs. 

7.     Termination  of  Offer  by  Counter-offer. 

Minneapolis  &  St.  Louis  Railway  v.  Columbus  Rolling  Mill, 
up  U.  S.  149. 

The  railroad  company  sues  the  mill,  alleging  an  agreement  for 
the  purchase  and  sale  of  2,000  tons  of  rails.  On  December  5,  the 
railroad  asked  for  a  quotation  on  prices  for  2,000  to  5,000  tons  of 
iron  rails.  On  December  8,  the  mill  offered  to  sell  2,000  to  5,000 
tons  at  $54.00  per  gross  ton,  and  stated  that  in  case  of  acceptance 
it  expected  to  be  notified  before  December  20.  On  December 
16,  the  railroad  ordered  1,200  tons.  On  December  18,  the  mill 
declined  to  take  the  order.  On  December  19,  the  railroad  ordered 
2,000  tons,  which  the  mill  refused  to  deliver. 

I  fold,  that  no  contract  was  formed,  as  the  counter-offer  termi- 
nated the  original  offer. 


FORMATION    OF    CONTRACTS  33 

Gray,  J. 

As  no  contract  is  complete  without  the  mutual  assent  of  the 
parties,  an  offer  to  sell  imposes  no  obligation  until  it  is  accepted  accord- 
ing to  its  terms.  So  long  as  the  offer  has  been  neither  accepted  nor 
rejected,  the  negotiation  remains  open  and  imposes  no  obligation  upon 
either  party ;  the  one  may  decline  to  accept,  or  the  other  may  withdraw 
his  offer;  and  either  rejection  or  withdrawal  leaves  the  matter  as  if 
no  offer  had  ever  been  made.  A  proposal  to  accept,  or  an  acceptance, 
upon  terms  varying  from  those  offered,  is  a  rejection  of  the  offer  and 
puts  an  end  to  the  negotiation,  unless  the  party  who  made  the  original 
offer  renews  it,  or  assents  to  the  modification  suggested.  The  other 
party,  having  once  rejected  the  offer,  cannot  afterwards  revive  it  by 
tendering  an  acceptance  of  it.  If  the  offer  does  not  limit  the  time  for 
its  acceptance,  it  must  be  accepted  within  a  reasonable  time.  If  it 
does,  it  may,  at  any  time  within  the  limit  and  so  long  as  it  remains 
open,  be  accepted  or  rejected  by  the  party  to  whom,  or  be  withdrawn 
by  the  party  by  whom,  it  was  made. 

The  defendant,  by  the  letter  of  December  8,  offered  to  sell  to  the 
plaintiff  two  thousand  to  five  thousand  tons  of  iron  rails  on  certain 
terms  specified,  and  added  that  if  the  offer  was  accepted  the  defendant 
would  expect  to  be  notified  prior  to  December  20.  This  offer,  while  it 
remained  open,  without  having  been  rejected  by  the  plaintiff  or 
revoked  by  the  defendant,  would  authorize  the  plaintiff  to  take  at 
his  election  any  number  of  tons  not  less  than  two  thousand  nor  more 
than  five  thousand,  on  the  terms  specified.  The  offer,  while  unrevoked, 
might  be  accepted  or  rejected  by  the  plaintiff  at  any  time  before 
December  20.  Instead  of  accepting  the  offer  made,  the  plaintiff,  on 
December  16,  by  telegram  and  letter  referring  to  the  defendant's 
letter  of  December  8,  directed  the  defendant  to  enter  an  order  for 
twelve  hundred  tons  on  the  same  terms.  The  mention  in  both  tele- 
gram and  letter  of  the  date  and  the  terms  of  the  defendant's  original 
offer,  shows  that  the  plaintiff's  order  was  not  an  independent  proposal, 
but  an  answer  to  the  defendant's  offer,  a  qualified  acceptance  of  that 
offer  varying  the  number  of  tons,  and  therefore  in  law  a  rejection  of 
the  offer.  On  December  18,  the  defendant  by  telegram  declined  to 
fulfill  the  plaintiff's  order.  The  negotiation  between  the  parties  was 
thus  closed,  and  the  plaintiff  could  not  afterwards  fall  back  on  the 
defendant's  original  offer.  The  plaintiff's  attempt  to  do  so,  by  the 
telegram  of  December  19,  was  therefore  ineffectual  and  created  no 
rights  against  the  defendant. 

II. 

FORM  OF  CONTRACTS. 

Certain  contracts,  though  possessing  the  other  elements  neces- 
sary to  make  a  valid  contract,  must  be  in  a  particular  form  in  order 
to  be  enforceable.     These  contracts  may  be  divided  into  contracts 


34  COMMERCIAL   LAW    CASES 

which  must  be  sealed  and  contracts  which  must  be  in  writing. 
All  other  contracts  are  equally  good  whether  sealed,  written,  or 
oral.  Grants  or  conveyances  of  land;  bonds  (obligations  con- 
ditioned upon  the  payment  of  money  or  the  doing  of,  or  forbear- 
ance from,  some  act)  ;  covenants  (warranties  of  the  performance 
or  non-performance  of  certain  acts,  or  of  the  existence  or  non- 
existence of  certain  facts)  ;  and  releases,  must  be  sealed.  At  the 
present  time,  the  seal  need  be  nothing  more  than  an  attached  wafer 
of  any  sort  and  some  states  have  gone  so  far  as  to  hold  that  the 
seal  may  be  made  by  a  mark  upon  the  paper  itself.  Indeed,  some 
states  have  by  statute  abolished  the  distinction  between  sealed  and 
unsealed  instruments. 

The  following  are  characteristics  of  agreements  under  seal : 

1.  They  must  be  delivered  in  order  to  create  a  contractual 
obligation.  This  delivery  may  be  to  the  other  contracting 
party  himself,  or  it  may  be  to  a  third  person  to  hold 
pending  the  fulfilment  of  conditions,  in  which  case  the 
delivery  is  said  to  be  in  escrow. 

2.  The  Statute  of  Limitations,  which  limits  the  time  within 
which  actions  may  be  brought,  allows  a  longer  period  for 
this  purpose  in  the  case  of  sealed  than  in  the  case  of  un- 
sealed instruments. 

3.  Recitals  in  a  sealed  instrument  are  conclusive  against  the 
parties  thereto,  who  are  said  to  be  estopped  to  deny  them. 

4.  A  contract  under  seal  merges  a  prior  simple  contract 
(i.e.,  any  contract  not  under  seal,  whether  written  or 
oral),  which  no  longer  exists  independently. 

5.  In  most  cases,  no  consideration  for  an  agreement  under 
seal  is  necessary ;  although  when  there  has  been  a  consid- 
eration it  may  be  shown  to  be  illegal  or  immoral.  Courts 
of  equity,  however,  will  not  grant  specific  performance 
(i.e.,  literal  performance  of  the  terms  of  the.  contract 
as  distinguished  from  damages  for  its  breach)  when  the 
contract  is  without,  or  is  upon  inadequate,  consideration. 

Certain  contracts  to  be  enforceable  must  be  in  writing  under 
the  terms  of  the  Statute  of  Frauds,  originally  enacted  in  England 
in  1677,  and  intended  to  restrain  the  prevalent  tendency  toward 
fraud  and  perjury.  This  statute,  parts  of  which  have  been  enacted 
in  similar  form  by  all  jurisdictions  basing  their  legal  systems  on 
the  law  of  England,  specifies  certain  kinds  of  contracts  which  shall 
not  be  sued  upon  unless  evidenced  by  a  memorandum  of  their 
terms  signed  by  the  party  to  be  charged.  Two  sections  of  this 
statute,  the  fourth  and  the  seventeenth,  have  been  universally 
reenacted  in  substance  in  the  modern  statutes. 

The  fourth  section  provides  that  unless  a  contract  is  evidenced 
by  the  reciuired  mcnioranchini,  no  suit  shall  be  brought  thereon: 


FORMATION    OF    CONTRACTS  35 

1.  To  charge  an  executor  or  administrator  upon  a  special 
promise  to  pay  out  of  his  own  estate. 

2.  To  charge  a  person  to  answer  for  the  debt,  default  or 
misdoings  of  another.  It  has  generally  been  held  under 
this  head  that  when  the  payment  of  the  debt  of  another 
is  incidental  only,  the  case  is  not  within  the  prohibition 
of  the  statute.    The  case  is  also  not  within  the  statute : 

(a)  if  the  promise  is  a  promise  to  the  debtor,  not 
the  creditor,  to  pay  his  debt ; 

(b)  if  exclusive  credit  is  given  to  the  promisor; 

(c)  if  the  liabilit}^  is  shifted  from  the  debtor  to  the 
promisor ;  and 

(d)  if  the  main  object  of  the  promise  is  to  serve 
some  special  business  purpose  of  the  promisor. 

3.  To  charge  a  person  upon  an  agreement  made  upon  consid- 
eration of  marriage. 

4.  To  charge  a  person  upon  a  contract  for  the  sale  of  lands 
or  any  interest  in  or  concerning  them. 

5.  To  charge  a  person  upon  an  agreement  that  is  not  to 
be  performed  within  a  year  from  the  time  it  is  made, 
a  provision  which  is  restricted  to  contracts  impossible 
of  performance  within  that  time. 

In  order  to  satisfy  the  provisions  of  this  section,  a  note  or 
memorandum  is  essential,  although  no  particular  form  is  required. 
It  must  express  the  substance  of  the  contract  with  reasonable 
certainty,  must  show  who  are  the  parties  to  the  contract,  and  must 
be  signed  by  the  party  against  whom  suit  is  brought,  or  by  his 
duly  authorized  agent.  A  few  jurisdictions  hold  that  it  must  be 
signed  by  both  parties.  Failure  to  comply  with  the  fourth  section 
excludes  oral  proof  of  the  contract  and  makes  it  unenforceable 
unless  the  other  party  has  paid  money,  performed  services,  or 
conveyed  property  under  it  to  such  an  extent  that  he  cannot  be 
placed  in  statu  quo.  In  that  event,  he  is  entitled  to  recover  for  the 
benefit  conferred.  In  addition  to  the  foregoing,  certain  states 
provide  that  a  promise  to  pay  a  debt  discharged  by  bankruptcy  or 
insolvency,  an  infant's  ratification  of  his  contract  when  he  becomes 
of  age,  a  contract  to  make  a  will,  or  a  representation  concerning 
the  credit  of  another  party,  must  be  in  writing  in  order  to  support 
an  action. 

The  seventeenth  section  of  the  statute  of  frauds  relates  to  the 
sale  of  goods,  wares  and  merchandise,  if  the  sale  involves  more 
than  a  specified  price,  ranging  from  fifty  dollars  to  two  thousand 
five  hundred  dollars  in  the  several  states.  This  section  may  be 
satisfied  not  only  by  the  memorandum,  but  by  part  payment  or 
receipt  and  acceptance  of  part  of  the  goods,  a  subject  to  be  dis- 
cussed under  the  law  of  Sales. 


36  COMMERCIAL    LAW    CASES 

A.     Scaled  Instruments. 

I.    Nature  of  a  Seal. 

Lor  ah  v.  Nissley.  if,6  Pa.  St.  ji'p. 

Nissley  made  a  note  payable  to  the  order  of  Lorah,  which  note 
he  sealed  by  writing  his  name  to  the  left  of  a  printed  word  "seal." 
The  question  arises  whether  this  was  a  sealed  instrument  within 
the  meaning  of  the  statute  of  limitations,  which  provides  that 
actions  may  be  brought  on  sealed  contracts  within  twenty  years 
from  the  due  date,  while  actions  on  unsealed  contracts  must  be 
brought  within  six  years. 

Held,  that  the  printed  word  "seal"  is  at  the  present  time  a  suf- 
ficient seal. 

Mitchell,  J. 

The  days  of  actual  sealing  of  legal  documents,  in  its  original  sense 
of  the  impression  of  an  individual  mark  or  device  upon  wax  or  wafer, 
or  even  on  the  parchment  or  paper  itself,  have  long  gone  by.  It  is 
immaterial  what  device  the  impression  bears,  and  the  same  stamp  may 
serve  several  parties  in  the  same  deed.  Not  only  so,  but  the  use  of 
wax  has  almost  entirely,  and  even  of  wafers  very  largely,  ceased.  In 
short,  sealing  has  become  constructive  rather  than  actual,  and  is  in  a 
great  degree  a  matter  of  intention. 

Decisions  establish  beyond  question  that  any  flourish  or  mark 
however  irregular  or  inconsiderable,  will  be  a  good  seal,  if  so  intended, 
and  a  fortiori  the  same  result  must  be  produced  by  writing  the  word 
"seal,"  or  the  letters  "L.  S.,"  meaning  originally  locus  sigilli,  but  now 
having  acquired  the  popular  force  of  an  arbitrary  sign  for  a  seal,  just 
as  the  sign  "&"  is  held  and  used  to  mean  "and"  by  thousands  who  do 
not  recognize  it  as  the  Middle  Ages  manuscript  contraction  for  the 
Latin  "et." 

If  therefore  the  word  "seal"  on  the  note  in  suit  had  been  written 
by  Nissley  after  his  name,  there  could  have  been  no  doubt  about  its 
efficacy  to  make  a  scaled  instrument.  Docs  it  alter  the  case  any  that 
it  was  not  written  by  him,  but  printed  beforehand?  We  cannot  see 
any  good  reason  why  it  should.  The  note  itself  was  a  printed  form 
with  blank  s])accs  for  the  i)articulars  to  be  filled  in,  and  the  use  of  it 
raises  a  conclusive  presumption  that  all  parts  of  it  were  adopted  by 
tbe  signer,  except  such  as  were  clearly  struck  out  or  intended  to  be 
canceled  before  signing.  Tbe  pressure  of  business  life  and  tbe  sub- 
division of  labor  in  our  day,  have  brought  into  use  many  things  ready- 
made  by  wholesale  which  our  ancestors  made  singly  for  each  occasion, 
and  among  otbers  tlie  conveniences  of  printed  blanks  for  tbe  common 
forms  of  written  in  iruments. 


FORMATION    OF    CONTRACTS  ^y 

2.  Delivery. 

Tisher  v.  Becknnth.  jo  Wis.  ^§. 

Tisher  made  a  deed  of  certain  real  estate  to  his  son,  Charles, 
which  was  neither  dated  nor  delivered.  The  deed  was  kept  by 
Tisher  in  a  trunk  ,in  which  the  son  kept  some  of  his  papers,  and 
from  which  the  son  stole  it,  and  mortgaged  the  premises  to  the 
defendants.  Tisher  seeks  to  restrain  them  from  foreclosing  on  the 
mortgage  given  by  the  son. 

Held,  that  a  deed  must  be  delivered  in  order  to  be  valid. 

Dixon,  C.  J. 

It  is  essential  to  the  validity  of  a  deed  that  it  should  be  delivered, 
and  such  delivery  to  be  valid  must  be  voluntary,  that  is,  made  with 
the  assent  and  in  pursuance  of  an  intention  on  the  part  of  the  grantor 
to  deliver  it,  and  if  not  so  delivered  it  conveys  no  title.  A  deed  pur- 
loined or  stolen  from  the  grantor,  or  the  possession  of  which  was 
fraudulently  or  wrongfully  obtained  from  him  without  his  knowledge, 
consent  or  acquiescence,  is  no  more  effectual  to  pass  title  to  the  sup- 
posed grantee  than  if  it  were  a  total  forgery,  and  an  instrument  of 
the  latter  kind  had  been  spread  upon  the  record.  The  only  question 
which  can  ever  arise  to  defeat  the  title  of  the  supposed  grantor  in 
such  cases,  is  whether  he  was  guilty  of  any  negligence  in  having  made, 
signed  and  acknowledged  the  instrument,  and  in  suffering  it  to  be  kept 
or  deposited  in  some  place  where  he  knew  the  party  named  as  grantee 
might,  if  so  disposed,  readily  and  without  trouble  obtain  such  wrong- 
ful possession  of  it  and  so  be  enabled  to  deceive  and  defraud  inno- 
cent third  persons.  It  might  possibly  be  that  a  case  of  that  kind  could 
be  presented  where  the  negligence  of  the  supposed  grantor  in  this 
respect  was  so  great,  and  his  inattention  and  carelessness  to  the  rights 
of  others  so  marked,  that  the  law  would  on  that  account  estop  him 
from  setting  up  his  title  as  against  a  bona  fide  purchaser  for  value 
under  such  deed.  There  are  some  facts  and  circumstances  in  this 
case  strongly  suggestive  of  such  a  defense,  and  were  it  not  for  the 
fact  found  by  the  court  that  the  deed  was  never  fully  executed,  and 
the  further  fact  fully  established  in  evidence  that  it  was  unstamped 
when  put  away  by  the  plaintiff'  in  the  trunk  in  the  manner  described 
by  himself  and  the  other  witnesses,  we  might  possibly  have  some  hesi- 
tation about  affirming  the  judgment  of  the  court  below  on  this  ground. 

3.  Estoppel. 

.Ulantic  Dock  Co.  v.  Lcovitt.  ^4  N.  Y.  S5- 

The  Atlantic  Dock  Company  sold  a  piece  of  property  to  the 
defendants'  predecessor  in  title.  The  deed  recited  that  the  said 
predecessor  in  title  and  his  assigns  should  not  use  the  property 


38  COMMERCIAl.    LAW    CASES 

for  a  distillery.  The  defendants  built  a  distillery  on  the  prop- 
erty and  the  plaintiff  sues  to  restrain  them  from  violating  the 
covenant. 

Held,  that  a  person  who  is  a  party  to  a  deed  is  estopped  to  deny 
the  recitals  therein  contained. 

Earl,  C. 

In  the  case  of  a  deed  containing  covenants  to  be  performed  by 
the  grantee,  the  grantee  who  has  induced  the  grantor  to  give  the  deed 
in  reliance  upon  the  covenants,  and  who  has  accepted  the  deed  and 
enjoyed  the  estate  granted,  is  estopped  from  denying  his  covenants. 
He  is  estopped  from  denying  that  the  seal  attached  to  the  deed  is  his 
as  well  as  that  of  the  grantor,  and  hence  when  sued  upon  his  cov- 
enants, the  proof  of  the  deed  and  of  his  acceptance  thereof  and 
enjoyment  of  the  estate  conclusively  establishes  that  he  has  covenanted 
as  stated  in  the  deed.  "A  recital  of  a  fact  in  a  deed,  is  as  against 
the  grantee  in  such  deed,  and  all  persons  claiming  under  him  through 
that  deed,  evidence  of  the  fact  recited  therein,  so  as  to  save  the 
necessity  of  further  proof  thereof  by  the  grantor  or  those  who  claim 
under  him."  The  acceptance  of  the  deed  operates  as  an  estoppel 
upon  the  grantee  and  his  assigns  or  representatives.  "A  man  who 
admits  a  fact  or  deed  in  general  terms,  either  by  reciting  it  in  an 
instrument  executed  by  him  or  by  acting  under  it,  shall  not  be  re- 
ceived to  deny  its  existence."  And  such  estoppels  run  with  the 
land  into  whose  hands  so-ever  it  comes. 

4.     Merger  of  Prior  Simple  Contract. 

Griswold  v.  Eastman,  fji  Minn.  i8p. 

Eastman  and  Merriam  owned  an  island  in  the  Mississippi, 
part  of  which  they  laid  out  in  lots  according  to  a  plat,  showing 
Park  Street  running  along  the  edge  of  the  bluff.  Purchasers 
of  lots  claim  that  Eastman  and  Merriam  represented  that  the  land 
between  Park  Street  and  the  river  was  dedicated  to  public  use, 
although  neither  the  plat  nor  their  deeds  so  provided.  They  sue 
to  enjoin  Eastman   from  asserting  title  to  the  land. 

Held,  that  any  prior  contracts  are  merged  in  the  subsequently 
executed  deeds. 

Mitchell,  J. 

After  the  plat  was  executed  and  filed,  conveyances  according 
and  with  reference  to  it  were  accepted  in  performance  of  these 
executory  contracts;  and  there  is  not  a  particle  of  evidence  that 
at  the  time  of  acceptance  of  these  conveyances  the  purchasers  were 
not  fully  aware  of  the  nature  and  contents  of  the  recorded  plat. 

Where  deeds  are  executed  and  accepted  in  performance  of  ex- 
ecutory contracts  to  convey,   the  latter   become    functus   officio,   and 


FORMATION    OF    CONTRACTS  39 

thenceforth  the  rights  of  the  parties  are  to  be  determined  by  the 
deeds,  and  not  by  the  contracts,  the  presumption  being  that  the 
deeds  give  expression  to  the  final  purposes  of  the  parties;  and  the 
deeds  will  be  conclusive  unless  it  be  show^n  that  the  grantees  have 
been  led  by  fraud  or  mistake  of  fact  to  accept  something  different 
from  what  the  executory  contracts  called  for,  in  which  cases,  the 
courts  will  give  relief  as  in  other  cases  of  fraud  or  mistake. 

5.     Nature  of  Consideration  Usually  Immaterial  at  Law. 

Hartshorn  v.  Day.  ip  How.  (U.  S.)  211. 

Day  sues  Hartshorn  and  Hayward  in  an  action  to  determine 
the  .title  to  a  patent  for  the  preparation  of  rubber.  Both  parties 
claim  under  Chaffee,  the  original  patentee,  who  had  attempted 
to  rescind  a  sealed  agreement  under  which  Hartshorn  and  Hay- 
ward  hold,  asserting  that  the  agreement  had  been  procured  by 
fraud.  Following  this  attempted  rescission  Chaffee  assigned  the 
patent  to  Day. 

Held,  that  in  the  case  of  a  sealed  instrument  a  lav^  court  will 
not  go  behind  the  seal  to  determine  fraud. 

Nelson,  J. 

The  general  rule  is,  that  in  an  action  upon  a  sealed  instru- 
ment in  a  court  of  law,  failure  of  consideration,  or  fraud  in  the 
consideration,  for  the  purpose  of  avoiding  the  obligation,  is  not 
admissible  as  between  parties  and  privies  to  the  deed;  and,  more 
especially,  where  there  has  been  a  part  execution  of  the  contract. 
The  difficulties  are  in  adjusting  the  rights  and  equities  of  the 
parties  in  a  court  of  law;  and  hence,  in  the  states  where  the  two 
systems  of  jurisprudence  prevail,  of  equity  and  the  common  law,  a 
court  of  law  refuses  to  open  the  question  of  fraud  in  the  considera- 
tion, or  in  the  transaction  out  of  which  the  consideration  arises, 
in  a  suit  upon  the  sealed  instrument,  but  turns  the  party  over  to  a 
court  of  equity,  where  the  instrument  can  be  set  aside  upon  such 
terms  as,  under  all  the  circumstances,  may  be  equitable  and  just 
between  the  parties.  A  court  of  law  can  hold  no  middle  course;  the 
question  is  limited  to  the  validity  or  invalidity  of  the  deed. 

Fraud  in  the  execution  of  the  instrument  has  always  been  ad- 
mitted in  a  court  of  law,  as  where  it  has  been  misread,  or  some 
other  fraud  or  imposition  has  been  practiced  upon  the  party  in 
procuring  his  signature  and  seal.  The  fraud  in  this  aspect  goes 
to  the  question  whether  or  not  the  instrument  ever  had  any  legal 
existence. 

It  is  said  that  fraud  vitiates  all  contracts,  and  even  records, 
which  is  doubtless  true  in  a  general  sense.  But  it  must  be  reached 
in  some  regular  and  authoritative  mode ;  and  this  may  depend  upon 
the  form  in  which  it  is  presented,  and  also  upon  the  parties  to  the 


40  COMMERCIAL   LAW    CASES 

litigation.    A  record  of  judgment  may  be  avoided  for  fraud,  but  not 
between  the  parties  or  privies  in  a  court  of  law. 

The  case  in  hand  illustrates  the  impropriety  and  injustice  of 
admitting  evidence  of  fraud  to  defeat  agreements  of  the  character 
in  question  in  a  court  of  law.  Goodyear  and  his  licensees  had  acquired 
vested  and  valuable  rights  under  the  agreements  in  this  patent, 
and  were  in  no  way  privy  to,  or  connected  with,  the  alleged  fraud, 
nor  parties  to  this  suit;  and  yet  it  is  assumed,  and  without  the 
assumption  the  fraud  would  be  immaterial,  that  the  effect  of  avoid- 
ing the  agreements  would  be  to  abrogate  these  rights.  They  had 
been  in  the  enjoyment  of  them  for  nearly  three  years,  and  may 
have  invested  large  amounts  of  capital  in  the  confidence  of  their 
validity.  They  were  derived  from  Chaffee  himself,  the  patentee 
of  the  improvement.  A  court  of  equity,  on  an  application  by 
him  to  set  aside  the  agreements  on  the  ground  of  fraud,  would  have 
required  that  these  third  parties  in  interest  should  have  been  made 
parties  to  the  suit,  and  would  have  protected  their  rights  or  secured 
them  against  loss,  if  it  interfered  at  all,  upon  the  commonest  prin- 
ciples of  equity  jurisprudence. 

6.     Illegality    or    Immorality    of    Consideration    of    Sealed 
Contract. 

Collins  V.  Blantern.  2  Wil.  (Eng.)  ^41. 

Collins,  the  plaintifif,  gave  a  note  to  Rudge  as  a  reward  for 
failing  to  appear  in  a  criminal  suit.  The  defendant,  Blantern, 
executed  a  bond  to  Collins  to  guarantee  payment  of  the  note,  which 
was  the  only  consideration  for  the  bond,  on  vjrhich  Collins  now 
sues. 

Held,  that  the  consideration  for  a  sealed  instrument  may  be 
shown  to  be  illegal  or  immoral. 

Wilmot,  L.  C.  J. 

It  is  now  objected,  as  a  maxim,  that  the  law  will  not  endure  a 
fact  outside  of  what  appears  in  a  specialty  to  be  averred  against 
it,  and  that  a  deed  cannot  be  defeated  by  anything  less  than  a 
deed,  and  a  record  by  a  record,  and  that  if  there  be  no  considera- 
tion for  a  bond  it  is  a  gift.  I  answer,  that  the  present  condi- 
tion is  for  the  payment  of  a  sum  of  money,  but  that  payment  to  be 
made  was  grounded  upon  a  vicious  consideration,  which  is  not  in- 
consistent with  the  condition  of  the  bond,  but  strikes  at  the  con- 
tract itself  in  such  a  manner  as  shows  that,  in  truth,  the  bond 
never  had  any  legal  entity,  and  if  it  never  had  any  being  at  all, 
then  the  rule  or  maxim  that  a  deed  must  be  defeated  by  a  deed  of 
equal  strength  does  not  apply  to  this  case.  The  law  will  legiti- 
mate the  showing  it  void  ah  initio,  and  this  can  only  be  done  by 
pleading;  nothing  is  due  under  such  a  contract;  then  the  law  gives 


FORMATION    OF    CONTRACTS  4I 

no  action,  the  debitnni  never  existed;  as  much  as  if  it  had  been 
said  it  shall  be  void  because  there  is  no  debt;  but  if  this  wicked 
contract  be  not  pleadable,  it  will  be  good  at  law,  be  sanctified  thereby, 
and  have  the  same  legal  operation  as  a  good  and  an  honest  con- 
tract, which  seems  to  me  most  unreasonable  and  unrighteous,  and 
therefore,  unless  I  am  chained  down  by  law  to  reject  this  plea,  I 
will  admit  it,  and  let  justice  take  place.  What  strange  absurdity 
would  it  be  for  the  law  to  say  that  this  contract  is  wicked  and 
void,  and  in  the  same  breath  for  the  law  to  say,  you  shall  not  be 
permitted  to  plead  the  facts  which  clearly  show  it  to  be  wicked  and 
void !  I  am  not  for  stirring  a  single  pebble  of  the  common  law,  and 
without  altering  the  least  tittle  thereof,  I  think  it  is  competent, 
and  reaches  the  case  before  us. 

7.    Nature  of  Consideration  Material  in  Equity. 

Crandall  v.  Willig.  i66  III.  2^^. 

Mr.  and  Mrs.  Willig  gave  Wickersham  an  option  to  buy  a 
piece  of  property  at  any  time  within  a  year  and  a  half.  The 
option  was  sealed,  but  no  other  consideration  was  given.  Cran- 
dall, an  assignee  of  the  original  holder  of  this  option,  seeks  to 
enforce  specific  performance  of  the  contract  to  convey  the  real 
estate,  he  having  demanded  a  conveyance  within  the  time  specified 
buC  after  the  Willigs  had  repudiated  the  agreement. 

Held,  that  specific  performance  will  not  be  granted  in  the  case 
of  a  contract  for  which  there  is  no  consideration,  even  though  it 
be  under  seal. 

Carter,  J. 

It  rests  in  the  sound  legal  discretion  of  the  court  whether 
it  will  or  not  compel  the  specific  performance  of  a  contract.  True, 
that  discretion  must  be  exercised  according  to  the  settled  principles 
of  equity,  and  not  arbitrarily.  But  to  entitle  the  complainant  to  a 
decree  the  contract  must  be  founded  on  a  sufficient  consideration, 
and  must  be  reasonable,  fair  and  just.  Relief  will  not  be  granted 
unless  it  will  subserve  the  ends  of  justice.  And  in  the  case  of 
unilateral  contracts  the  courts  will  exercise  their  discretion  with 
great  care,  and  will  view  any  delay  of  the  purchaser  with  especial 
strictness. 

The  contract  in  the  case  at  bar  was  a  mere  option  given  by 
the  Willigs  to  Wickersham  to  purchase  the  land  in  question  within 
the  time  mentioned,  and  there  was,  before  its  acceptance,  no  con- 
sideration to  support  the  contract.  It  was  therefore  within  the 
power  of  the  Willigs  to  withdraw  this  option  at  any  time  before 
their  offer  to  sell  was  accepted.  True,  the  contract  was  under 
seal,  and  purported  to  be  based  upon  the  nominal  consideration 
of  one  dollar;  but  the  evidence  showed  that  there  was  in  fact  no 


42  COMMERCIAL    LAW    CASES 

consideration  whatever,  and  it  is  well  settled  that  in  equity  the 
real  consideration  may  be  inquired  into,  and  the  parties  are  not 
concluded  by  the  recitals  in  the  contract,  though  under  seal.  "Equity 
will  never  enforce  an  executory  agreement  unless  there  was  an  actual 
valuable  consideration,  and,  unlike  the  common  law,  it  does  not 
permit  a  seal  to  supply  the  place  of  a  real  consideration.  Disre- 
garding mere  forms  and  looking  at  the  reality,  it  requires  an  actual, 
valuable  consideration  as  essential  in  any  such  agreement,  and 
allows  the  want  of  it  to  be  shown,  notwithstanding  the  seal,  in  the 
enforcement  of  covenants,  settlements  and  executory  contracts  of 
every  description." 


B.     Statute  of  Frauds. 

I.     Promise  by  Executor  or  Administrator. 

Dillaby  v.  Wilcox.  60  Conn.  71. 

The  defendant,  the  administratrix  of  the  estate  of  William 
Wilcox,  promised  the  plaintiff,  the  collector  of  taxes,  that  if  he 
would  forbear  levying  for  taxes  upon  property  of  Gordon  Wilcox 
on  which  the  estate  of  William  Wilcox  had  a  mortgage,  she  would 
pay  the  taxes.     A  suit  is  brought  upon  this  promise. 

Held,  that  this  is  not  a  promise  by  an  executor  or  administra- 
tor to  answer  out  of  his  own  estate  for  a  claim  against  a  deceased 
person. 

Seymour,  J. 

The  first  clause  has  reference  to  promises  by  an  executor 
or  administrator  to  answer  out  of  his  own  estate  for  a  claim 
against  his  decedent — some  liability  resting  upon  the  executor 
or  administrator  strictly  in  his  representative  character  and  which, 
but  for  the  promise,  he  would  have  been  liable  to  discharge  only 
in  due  course  of  the  administration  of  the  estate.  To  change  the 
expression — this  clause  of  the  statute  covers  a  special  promise  made 
by  the  executor  or  administrator  to  pay,  out  of  his  own  estate,  what, 
(being  the  legal  representative  of  the  party  originally  liable)  he  is 
already,  in  that  representative  capacity,  under  a  liability  to  pay  to 
the  extent  of  the  property  which  has  come  into  his  hands.  "The 
particular  object  of  this  provision,"  says  a  recent  writer  upon  the 
statute,  "was  evidently  to  guard  executors  and  administrators  against 
being  held  to  a  personal  liability  to  pay  debts,  legacies  or  distributive 
shares  in  consequence  of  a  wilful  or  mistaken  perversion  of  expres- 
sions of  encouragement  which  they  may  have  used  in  conversation 
with  claimants  and  which  were  not  justified  by  the  ultimate  result  of 
administration  of  the  assets  in  their  hands."  However  that  may  be, 
the  suggestion  illustrates  the  nature  of  the  promise  referred  to  in 


FORMATION    OF    CONTRACTS  43 

this  section.  The  promise  proved,  in  the  case  before  us,  was  to  answer 
for  the  debt  or  default  of  Gordon  Wilcox,  a  third  party,  and  is  a 
promise  to  which  that  clause  has  no  reference.  The  suggestion  that 
the  defendant,  if  compelled  to  pay  the  judgment,  can  repay  herself 
out  of  the  assets  of  the  estate  does  not  tend  to  bring  the  promise  within 
the  clause.  Most  of  the  personal  obligations  of  an  executor  con- 
tracted in  the  course  of  his  administration  are  proper  charges  against 
the  estate  in  the  final  settlement  of  his  account,  but  they  are  none 
the  less  his  private  debts  for  which  he  is  alone  liable  in  his  private 
capacity.  In  Pratt  v.  Humphrey,  22  Conn.  317,  a  leading  case  upon 
this  clause,  the  promise  was  to  pay  a  debt  due  from  the  estate  of 
which  the  defendants  were  administrators — an  entirely  different  case 
from  the  one  at  bar. 

2.    Promise  to  Answer  for  Debt  of  Another. 

Mallory  v.  Gillett.  21  N.  Y.  412. 

Mallory  had  lien  upon  a  canal  boat  belonging  to  Haines.  Gil- 
lett promised  Mallory  to  pay  him  the  amount  due  if  he  would 
deliver  the  boat  to  Haines,  which  Mallory  accordingly  did.  Mal- 
lory sues  to  recover  the  amount  promised. 

Held,  that  this  promise  is  within  the  statute  of  frauds,  it 
being  a  promise  to  answer  for  the  debt,  default,  or  misdoings 
of  another. 

Comstock,  C.  J. 

There  is  no  pretense  that  the  defendant's  promise  was  given 
or  accepted  as  a  substitute  for  the  original  demand,  or  that  such 
demand  was  in  any  manner  extinguished.  The  promise  was,  there- 
fore, to  answer  for  the  existing  and  continuing  debt  of  another, 
or,  in  the  language  of  the  books,  it  was  a  collateral  promise.  The 
consideration  was  perfect,  but  as  there  was  no  writing,  the  case 
seems  to  fall  within  the  very  terms  of  the  statute.  Authorities 
need  not  be  cited  to  prove  that  the  sufficiency  of  the  consideration 
never  takes  a  case  out  of  the  statute.  Indeed,  there  can  be  no 
question  under  the  statute  of  frauds  in  any  case,  until  it  is  ascer- 
tained that  there  is  a  consideration  to  sustain  the  promise.  Without 
that  element,  the  agreement  is  void  before  we  come  to  the  statute. 
A  naked  promise  is  void  on  general  principles  of  law,  although  it 
be  in  writing.  The  mere  existence  of  a  past  debt  of  a  third  person 
will  not  sustain  an  agreement  to  pay  it,  unless  there  be  forbearance 
to  sue,  or  some  other  new  consideration.  In  such  a  case,  when  we 
find  there  is  a  new  consideration,  we  then,  and  not  till  then,  reach 
the  inquiry  whether  the  agreement  must  be  in  writing.  Such  is 
this  case.  It  is  nothing  to  say  that  here  was  a  new  consideration. 
If  such  were  not  the  fact,  there  would  be  no  question  in  the  case. 

There    is    sometimes    danger    of    error    creeping    into    the    law 


44  COMMERCIAL    LAW    CASES 

through  a  mere  misunderstanding  or  misuse  of  terms.  The  words 
"original"  and  "collateral"  are  not  in  the  statute  of  frauds,  but 
they  were  used  at  an  early  day — the  one  to  mark  the  obligation  of  a 
principal  debtor,  the  other  that  of  the  person  who  undertook  to  answer 
for  such  debt. 

What  is  a  promise  to  answer  for  the  "debt  or  default"  of  an- 
other person?  Under  this  language,  perplexing  questions  may  arise, 
and  many  have  arisen,  in  the  courts.  But  some  propositions  are 
extremely  plain;  and  one  of  them  is,  that  the  statute  points  to  no 
distinction  between  a  debt  created  at  the  time  when  the  collateral 
engagement  is  made,  and  one  having  a  previous  existence.  The 
requirement  is,  that  promises  to  answer  for  the  debt,  etc.,  of  a 
third  person,  be  in  writing.  The  original  and  collateral  obligations 
may  come  into  existence  at  the  same  time,  and  both  be  the  founda- 
tion of  the  credit,  or  the  one  may  exist  and  the  other  be  created 
afterwards.  In  either  case,  and  equally  in  both,  the  inquiry  under 
the  statute  is  whether  there  be  a  debtor  and  a  surety,  and  not 
when  the  relation  was  created.  If  A  say  to  B,  "If  you  will  suffer 
C  to  incur  a  debt  for  goods  whicli  you  will  now  or  hereafter  sell 
and  deliver  to  him,  I  will  see  you  paid,"  the  promise  is  within  the 
statute.  This  no  one  ever  doubted.  But  if  A  say  to  B,  "If  you  will 
forbear  to  sue  C  for  six  months  on  a  debt  heretofore  incurred  by 
him  for  goods  sold  and  delivered  to  him,  I  will  see  you  paid," — 
is  not  the  case  equally  plain?  So  if,  in  such  a  case,  instead  of  for- 
bearance, there  is  some  other  sufficient  consideration,  for  example, 
forgiving  a  part  of  the  debt  or  relinquishing  some  security  for  it,  the 
difference  is  still  one  of  circumstance,  but  not  of  principle.  In  the 
case  first  put,  the  consideration  of  the  guaranty  is  the  original  sale 
of  the  goods  on  the  faith  of  it :  in  the  other,  it  may  be  forbearance 
or  the  relinquishment  of  some  advantage,  the  original  debt  still 
remaining. 

It  is  said  that  the  promise  now  in  question  need  not  be  in  writing, 
because  it  was  new  and  original,  and  was  founded  on  the  relinquish- 
ment to  the  debtor  of  a  security  which  the  creditor  held.  To  say 
that  it  was  new  and  original,  expresses  no  idea  of  any  importance. 
Every  promise  is  new  and  original  that  was  never  made  before.  An 
undertaking  to  answer  for  an  old  debt  of  a  third  person  certainly  has 
no  more  of  originality  than  one  to  answer  for  a  debt  now  contracted. 
As  to  the  relinquishment  of  the  lien  or  security,  this,  although  a 
meritorious  consideration,  is,  in  judgment  of  law,  no  more  so  than 
any  other  which  is  sufficient  to  sustain  a  contract.  Forbearance  to 
sue  has  the  same  legal  merit,  and  so  has  the  release  of  a  part  of 
the  debt. 

3.     Promise  to  Debtor  to  Answer  for  his  Debt. 

/lldrich  V.  Auics.  p  Gray  {Mass.)  j6. 

Ahlrich,  the  plaintiff,  at  the  request  of  Ames,  the  defendant, 
and  for  a  valuable  consideration,  furnished  bail  for  Crehore,  upon 


FORMATION    OF    CONTRACTS  45 

which  Ames  promised  Aldrich  to  save  him  harmless.  The  defense 
is  that  this  was  a  promise  to  pay  the  debt  of  another  and  that 
therefore  the  action  cannot  be  maintained  without  an  agreement  in 
writing. 

Held,  that  a  promise  to  the  debtor,  not  the  creditor,  is  not, 
as  between  the  debtor  and  the  promisor,  within  the  statute. 

Shaw,  C.  J. 

This  is  a  promise  by  the  defendant  to  another,  to  pay  his  debt, 
or,  in  other  words,  to  save  him  from  the  performance  of  an  obligation 
which  might  result  in  a  debt.  But  it  is  a  promise  to  the  debtor  to 
pay  his  debt,  and  thereby  to  relieve  him  from  the  payment  of  it 
himself,  which  is  not  within  the  statute  of   frauds. 

The  theory  of  the  statute  of  frauds  is  this ;  that  when  a  third 
party  promises  the  creditor  to  pay  him  a  debt  due  to  him  from  a 
person  named,  the  effect  of  such  a  promise  is  to  become  a  surety  or 
guarantor  only,  and  shall  be  manifested  by  written  evidence.  The 
promise  in  such  case  is  to  the  creditor,  not  to  the  debtor.  For 
instance,  if  A.,  a  debtor,  owes  a  debt  to  B.,  and  C.  promises  B., 
the  creditor,  to  pay  it,  that  is  a  promise  to  the  creditor  to  pay  the 
debt  of  A,  But  in  the  same  case,  should  C,  on  good  consideration, 
promise  A.,  the  debtor,  to  pay  the  debt  to  B.  and  indemnify  A.  from 
the  payment,  although  one  of  the  results  is  to  pay  the  debt  to  B., 
yet  it  is  not  a  promise  to  the  creditor  to  pay  the  debt  of  another,  but 
a  promise  to  the  debtor  to  pay  his  debt. 

4.     Contract  Made  on  Credit  of  Promisor. 

Swift  V.  Pierce,  ij  Allen  (Mass.)  i^6. 

Swift  sues  to  recover  from  Pierce  and  another,  for  meat  which 
he  had  delivered  to  Hoar,  at  the  request  of  the  defendants.  The 
evidence  was  conflicting  whether  or  not  credit  had  been  given 
exclusively  to  the  defendants.  The  statute  of  frauds  was  pleaded 
and  the  case  came  up  on  the  question  of  the  correctness  of  instruc- 
tions to  the  jury. 

Hct\d,  that  an  oral  promise  to  pay  for  goods  delivered  to  an- 
other is  collateral  unless  credit  is  given  exclusively  to  the  promisor. 

Hoar,  J. 

If  the  contract  of  the  defendants  was  a  collateral  and  not  an 
original  promise,  then,  being  a  promise  to  pay  the  debt  of  another, 
and  not  in  writing,  tbe  statute  of  frauds  was  a  good  defense.  And 
the  jury  were  rightly  instructed  that,  if  they  found  that  the  defendants 
were  guarantors  only,  they  should  find  a  verdict  for  them.  The 
judge  added  "that  the  defendants  would  be  guarantors  only,  if  at  the 
time  said  articles  were  delivered  to  Hoar  the  plaintiff  gave  credit  to 
Hoar  alone."    The  instruction  should  have  been  that  the  defendants 


4t>  COMMERCIAL    LAW    CASES 

would  be  only  guarantors,  unless,  when  the  meats  were  delivered, 
the  plaintiff  gave  credit  to  them  alone.  It  seems  to  be  well  settled 
by  the  authorities  that  where  goods  are  delivered  to  one  person,  and 
another,  not  a  joint  contractor  with  him,  promises  to  pay  for  them, 
if  any  credit  is  given  to  the  former,  the  promise  of  the  latter  is 
collateral,  and  within  the  statute  of  frauds.  Chancellor  Kent  states 
the  rule  thus:  "If  the  whole  credit  be  not  given  to  the  person  who 
comes  in  to  answer  for  another,  his  undertaking  is  collateral,  and 
must  be  in  writing." 

The  statement  of  the  learned  judge  was  certainly  true,  that  if 
the  credit  was  given  to  Hoar  only,  the  defendants  were  only  guaran- 
tors. But  he  did  not  inform  the  jury  that  the  defendants  might  be 
guarantors  also  in  case  any  credit  was  given  to  Hoar,  although  the 
plaintiff  gave  credit  in  part  to  their  guaranty  beside. 


5.     Extinction  of  Original  Debt. 

The  Merideii  Britannia  Co.  v.  Zingsen.  48  N.  Y.  247. 

Mattison  owed  money  to  the  plaintiff  which  he  could  not  pay, 
and  which  the  defendant  Zingsen  agreed  to  pay  for  him,  the  plain- 
tilT  agreeing  to  release  Mattison.  Suit  is  brought  upon  this  prom- 
ise and  the  defendant  sets  up  the  statute  of  frauds. 

Held,  that  when  the  original  debt  is  extinguished  in  consid- 
eration of  the  promise  of  a  third  person,  the  contract  is  not 
within  the  statute  of  frauds. 

Earl,  C. 

It  is  not  every  verbal  promise  to  pay  the  debt  of  another  that 
is  void  within  this  statute.  There  are  many  exceptions,  as  disclosed 
by  the  numerous  cases  upon  the  subject. 

A  promise  to  pay  the  debt  of  a  third  person  is  not  within  the 
statute,  where  it  is  agreed  between  the  parties,  the  creditor,  debtor 
and  promisor,  that  the  debt  shall  be  extinguished  and  the  creditor 
shall  look  only  to  the  promisor  for  payment  upon  the  new  promise. 
In  such  case  no  other  person  remains  liable  for  the  debt  but  the 
promisor,  and  his  undertaking  is  not  collateral  but  original  to  pay  his 
own  debt,  and  not  to  answer  for  the  debt  of  another.  There  is  then 
what  is  known  in  the  civil  law  as  a  delegation,  and  the  creditor  takes 
a   new   debtor,   who  is  called  the   delegated  debtor. 

Chief  Justice  Mansfield  said  that  he  did  not  see  "how  one  person 
could  undertake  for  the  debt  of  another,  when  the  debt  for  which  he 
was  supposed  to  undertake  was  discharged  by  the  very  bargain." 
"A  promise  to  assume  an  antecedent  liability  of  a  third  person  is 
without  the  statute,  if  the  third  person's  liability  had  become  extinct 
at  the  time  when  that  of  the  promisor  came  into  existence,  or  if 
the  third  person's  antecedent  liability  to  the  promisee  is  discharged 


FORMATION    OF    CONTRACTS  47 

in  consideration  of  its  assumption  by  the  promisor."  And,  in  this 
case,  it  was  distinctly  agreed  between  the  three  parties — the  cred- 
itor, debtor  and  promisor — that  in  consideration  that  the  father 
of  the  debtor  would  pay  the  promisor  $i,ooo  in  money,  and  the  debtor 
give  him  his  own  notes  for  the  balance,  the  promisor  would  pay  the 
claim  of  the  creditor  in  plated  ware,  in  the  months  of  February  and 
March  thereafter,   and  the   creditor  should   release   the   debtor. 

6.    Promise  for  Benefit  Received  by  Promisor  from  Creditor. 

Davis  V.  Patrick.  141  U.  S.  4yp. 

Patrick,  manager  of  a  mine  in  which  Davis  was  interested  as 
a  creditor,  was  induced  to  continue  work  at  the  mine  by  Davis' 
promise  to  see  that  Patrick  was  paid  for  his  services. 

Held,  that  when  the  leading  object  of  the  transaction  is  to 
secure  a  benefit  to  the  promisor,  the  case  is  not  within  the  statute 
of  frauds. 

Brewer,  J. 

The  purpose  of  this  provision  of  the  statute  of  frauds  was  not 
to  effectuate,  but  to  prevent,  wrong.  It  does  not  apply  to  promises 
in  respect  to  debts  created  at  the  instance  and  for  the  benefit  of  the 
promisor,  but  only  to  those  by  which  the  debt  of  one  party  is  sought 
to  be  charged  upon  and  collected  from  another.  The  reason  of  the 
statute  is  obvious,  for  in  the  one  case  if  there  be  any  conflict  between 
the  parties  as  to  the  exact  terms  of  the  promise,  the  courts  can  see 
that  justice  is  done  by  charging  against  the  promisor  the  reasonable 
value  of  that  in  respect  to  which  the  promise  was  made,  while  in  the 
other  case,  and  when  a  third  party  is  the  real  debtor,  and  the  party 
alone  receiving  benefit,  it  is  impossible  to  solve  the  conflict  of  memory 
or  testimony  in  any  manner  certain  to  accomplish  justice.  There  is 
also  a  temptation  for  a  promisee,  in  a  case  where  the  real  debtor 
has  proved  insolvent  or  unable  to  pay,  to  enlarge  the  scope  of  the 
promise,  or  to  torture  mere  words,  of  encouragement  and  confidence 
into  an  absolute  promise;  and  it  is  so  obviously  just  that  a  promisor 
receiving  no  benefits  should  be  bound  only  by  the  exact  terms  of  his 
promise,  that  this  statute  requiring  a  memorandum  in  writing  was 
enacted.  Therefore,  whenever  the  alleged  promisor  is  an  absolute 
stranger  to  the  transaction,  and  without  interest  in  it,  courts  strictly 
uphold  the  obligations  of  this  statute.  But  cases  sometimes  arise  in 
which,  though  a  third  party  is  the  original  obligor,  the  primary 
debtor,  the  promisor  has  a  personal,  immediate  and  pecuniary  interest 
in  the  transaction,  and  is  therefore  himself  a  party  to  be  benefited  by 
the  performance  of  the  promisee.  In  such  cases  the  reason  which 
imderlies  and  which  prompted  this  statutory  provision  fails,  and  the 
courts  will  give  effect  to  the  promise.  As  said  by  this  court  in 
Emerson  v.  Slater,  22  Howard  28,  43 :    "Whenever  the  main  purpose 


48  COMMERCIAL    LAW    CASES 

and  object  of  the  promisor  is  not  to  answer  for  another,  but  to  sub- 
serve some  pecuniary  or  business  purpose  of  his  own,  involving 
either  a  benefit  to  himself  or  damage  to  the  other  contracting  party, 
his  promise  is  not  within  the  statute,  although  it  may  be  in  form  a 
promise  to  pay  the  debt  of  another,  and  although  the  performance  of 
it  may  incidentally  have  the  effect  of  extinguishing  that  liability."  To 
this  may  be  added :  "The  statute  contemplates  the  mere  promise  of 
one  man  to  be  responsible  for  another,  and  cannot  be  interposed  as 
a  cover  and  shield  against  the  actual  obligations  of  the  defendant 
himself."  The  thought  is,  that  there  is  a  marked  difference  between 
a  promise  which,  without  any  interest  in  the  subject  matter  of  the 
promise  in  the  promisor,  is  purely  collateral  to  the  obligation  of  a 
third  party,  and  that  which,  though  operating  upon  the  debt  of  a 
third  party,  is  also  and  mainly  for  the  benefit  of  the  promisor.  The 
case  before  us  is  in  the  latter  category. 

7.     Promise  for  Benefit  Received  by  Promisor  from  Debtor. 

Furbish  v.  Goodnow.  p8  Mass.  2g6. 

Furbish  held  a  note  executed  by  Redding.  Redding  conveyed 
real  estate  to  the  defendant,  Goodnow,  upon  his  promise  to  pay 
Furbish  the  amount  of  the  note.  This  arrangement  was  oral, 
but  Furbish  contends  that  it  was  not  within  the  statute,  as  the 
defendant  received  property  in  return  for  his  promise. 

Held,  that  the  contract  is  within  the  statute  of  frauds,  as 
it  is  a  promise  to  answer  for  the  debt  of  another,  regardless  of  the 
benefit  to  the  promisor  from  the  debtor. 

Gray,  J. 

If  the  principal  and  immediate  object  of  the  transaction  is  to 
benefit  the  promisor,  not  to  secure  the  debt  of  another  person,  the 
promise  is  considered  not  as  collateral  to  the  debt  of  another,  but 
as  creating  an  original  debt  from  the  promisor,  which  is  not  within 
the  statute,  although  one  effect  of  its  payment  may  be  to  discharge 
the  debt  of  another.  It  must  however  be  constantly  borne  in  mind 
that  the  question  under  the  statute  is  not  whether  there  is  a  suf- 
ficient consideration  for  the  defendant's  promise,  but  whether  that 
promise  is  to  answer  for  the  debt  of  another.  The  common  law  re- 
quires a  consideration  for  every  promise,  oral  or  written ;  the  statute 
also  requires  that,  if  it  is  a  promise  to  answer  for  the  debt  of  another, 
it  shall  be  in  writing.  When  the  original  debtor  remains  liable,  yet 
if  the  creditor,  in  consideration  of  the  new  promise,  releases  some 
interest  or  advantage  relating  to  or  affecting  the  original  debt,  and 
inuring  to  the  benefit  of  the  new  promisor,  his  promise  is  considered 
as  a  promise  to  answer  for  his  own  debt,  and  the  case  is  not  within 
the  statute.  But  if  no  consideration  moves  from  the  creditor  to  the 
new  promisor,  and  the  original  debtor  still   remains  liable   for  the 


FORMATION  OF  CONTRACTS  49 

debt,  the  fact  that  the  promisee  gives  up  something  to  that  debtor, 
or  that  a  transfer  of  property  is  made  or  other  consideration  moves 
from  that  debtor  to  the  new  promisor  to  induce  the  latter  to  make 
the  new  promise,  does  not  make  this  promise  the  less  a  promise  to 
answer  for  the  debt  of  another;  but,  on  the  contrary,  the  fact  that 
the  only  new  consideration  either  inures  to  the  benefit  of  that  other 
person,  or  is  paid  by  him  to  the  new  promisor,  shows  that  the  object 
of  the  new  promise  is  to  answer  for  his  debt. 

8.     Promise  upon  Consideration  of  Marriage. 

Ogden  V.  Ogden.  i  Bland  (Md.)  284. 

Ogden  wrote  to  the  father  of  the  fiance  of  his  niece,  Nancy, 
that  he  would  give  her  $6,000  upon  her  marriage  and  $6,000  at 
his  death.  He  died  without  having  made  either  gift,  and  the 
plaintiffs  contend  that  this  was  a  contract  whereby  he  agreed  to 
pay  this  amount  in  consideration  of  their  marrying. 

Held,  that  a  contract  made  upon  consideration  of  marriage  is 
within  the  statute  of  frauds. 

Bland,  C. 

The  statute  of  frauds,  so  far  as  it  is  applicable  to  this  case,  is 
expressed  in  these  words : —  "No  action  shall  be  brought  whereby 
to  charge  any  person,  upon  any  agreement  made  upon  consideration 
of  marriage,  unless  the  agreement  upon  which  such  action  shall  be 
brought,  or  some  memorandum  or  note  thereof  shall  be  in  writing, 
and  signed  by  the  party  to  be  charged  therewith,  or  some  other  person 
thereunto  by  him  lawfully  authorized." 

This  clause  was  at  one  time  supposed  to  embrace  mutual  prom- 
ises to  marry,  but  that  notion  has  long  since  been  abandoned,  and 
it  is  now  held  to  extend  only  to  agreements  to  pay  marriage  por- 
tions, or  to  such  cases  as  the  one  now  under  consideration.  The 
word  "agreement,"  it  has  been  settled,  must  not  be  loosely  con- 
strued, but  be  taken  in  its  proper  and  correct  sense,  as  signifying 
a  mutual  contract  on  consideration  between  two  or  more  parties; 
the  whole  of  which,  the  consideration  as  well  as  the  promise,  must 
be  in  writing. 

The  whole  of  this  case  rests  upon  the  letter  of  the  226.  of  May, 
1817.  If  that  cannot  be  considered  as  an  agreement  within  the 
meaning  of  the  statute  of  frauds,  there  is  an  end  of  the  case.  The 
cases  in  which  letters  have  been  considered  as  constituting  such  an 
agreement,  have  gone  fully  as  far,  perhaps  farther,  than  a  just 
construction  of  the  statute  will  warrant.  They  all,  however,  go 
upon  the  principle  that  the  court  must  be  satisfied  by  a  fair  inter- 
pretation of  the  letters  that  they  import  a  concluded  agreement;  or 
afford  sufficient  materials   for  a  more   formal   agreement. 

But  this  letter  is  deficient  in  almost  every  substantial  particular. 


50  COMMERCIAL    LAW    CASES 

g.     Contracts  for  Sale  of  Interest  in  Land.     (Majority  Rule.) 

Hirth  V.  Graham.  50  Oh.  St.  57. 

Hirth  sues  Graham  to  recover  damages  for  breach  of  an  oral 
agreement  to  sell  Hirth  certain  growing  timber.  The  defense  is 
that  the  case  is  within  the  statute  of  frauds,  as  it  deals  with  an 
interest  in  land. 

Held,  that  according  to  the  Ohio  and  general  rule,  a  contract 
for  the  sale  of  growing  timber  is  within  the  statute  of  frauds. 

Bradbury,  J. 

Whether  a  sale  of  growing  trees  is  the  sale  of  an  interest  in 
or  concerning  land  has  long  been  a  much  controverted  subject  in 
the  courts  of  England  as  well  as  in  the  courts  of  the  several  states 
of  the  Union.  The  question  has  been  differently  decided  in  dif- 
ferent jurisdictions,  and  by  different  courts,  or  at  different  times  by 
the  same  court  within  the  same  jurisdiction.  The  courts  of  England, 
particularly,  have  varied  widely  in  their  holdings  on  the  subject. 

Many  decisions  have  been  announced  by  the  English  courts, 
the  tendency  of  which  have  been  to  greatly  narrow  the  application 
of  the  fourth  section  of  the  statute  of  frauds  to  crops,  or  timber, 
growing  upon  land.  Crops  planted  and  raised  annually  by  the  hand 
of  man  are  practically  withdrawn  from  its  operation  while  the  sale 
of  other  crops,  and  in  some  instances  growing  timber,  also,  are 
withdrawn  from  the  statute  where,  in  the  contemplation  of  the  con- 
tracting parties,  the  subject  of  the  contract  is  to  be  treated  as  a 
chattel. 

The  conflict  among  the  American  cases  on  the  subject  cannot 
be  wholly  reconciled.  In  Massachusetts,  Maine.  Maryland,  Kentucky 
and  Connecticut,  sales  of  growing  trees  to  be  presently  cut  and 
removed  by  the  vendee,  are  held  not  to  be  within  the  operation  of 
the  fourth  section  of  the  statute  of  frauds. 

The  courts  of  most  American  states,  however,  that  have  consid- 
ered the  question,  hold,  expressly,  that  a  sale  of  growing  or  stand- 
ing timber  is  a  contract  concerning  an  interest  in  lands,  and  within 
the  fourth  section  of  the  statute  of  frauds. 

The  question  is  now,  for  the  first  time,  before  this  court  for 
determination ;  and  we  are  at  liberty  to  adopt  that  rule  on  the  sub- 
ject most  conformable  to  sound  reason.  In  all  its  other  relations  to 
the  affairs  of  man,  growing  timber  is  regarded  as  an  integral  part 
of  the  land  upon  which  it  stands;  it  is  not  subject  to  levy  and  sale 
upon  execution  as  chattel  property ;  it  descends  with  the  land  to  the 
heir,  and  passes  to  the  vendee  with  the  soil.  Coal,  petroleum,  building- 
stone,  and  many  other  substances  constituting  integral  parts  of  the 
land  have  become  articles  of  commerce,  and  easily  detached  and 
removed,  and,  when  detached  and  removed,  become  personal  prop- 
erty as  well  as  fallen  timber;  but  no  case  is  found  in  which  it  is 
suggested  that  sales  of  such  substances,  with  a  view  to  their  immediate 


FORMATION    OF    CONTRACTS  5I 

removal,  would  not  be  within  the  statute.  Sales  of  growing  timber  are 
as  likely  to  become  the  subjects  of  fraud  and  perjury  as  are  the 
other  integral  parts  of  the  land,  and  the  question  whether  such  sale 
is  a  sale  of  an  interest  in  or  concerning  lands  should  depend,  not 
upon  the  intention  of  the  parties,  but  upon  the  legal  character  of  the 
subject  of  the  contract,  which,  in  the  case  of  growing  timber,  is  that 
of  realty. 

10.     Contracts  for  Sale  of  Interest  in  Land.     (Massachusetts 
Rule.) 

Drake  v.  Wells,  ii  Allen  (Mass.)  141. 

Standing  wood  was  orally  sold  at  auction  to  the  defendants. 
Afterwards,  the  land  on  which  the  timber  stood  was  sold  to  the 
plaintiffs,  who  sue  the  defendants  for  cutting  and  carrying  away 
the  wood  sold. 

Held,  that  an  oral  sale  of  standing  timber  does  not  pass  title 
until  the  timber  is  cut  and  that  a  subsequent  sale  of  the  land 
passed  title  to  such  timber  to  the  plaintiffs. 

Bigelow,  C.  J. 

The  doctrine  is  now  well  settled  that  a  sale  of  timber  or  other 
product  of  the  soil,  which  is  to  be  severed  from  the  freehold  by 
the  vendee  under  a  special  license  to  enter  on  the  land  for  that 
purpose  is,  in  contemplation  of  the  parties,  a  sale  of  chattels  only, 
and  cannot  be  regarded  as  passing  an  interest  in  the  land,  and  is 
not  for  that  reason  required  to  be  in  writing  as  being  within  the 
statute  of  frauds.  Such  license  to  enter  on  the  land  of  another, 
so  far  as  it  is  executed,  is  irrevocable ;  because,  by  the  severance 
of  the  timber  or  other  growth  of  the  soil  from  the  freehold,  in  execu- 
tion of  the  license,  it  becomes  personal  property,  the  title  to  which 
is  vested  in  the  vendee  absolutely,  and  the  rule  applies  that  where 
chattels  belonging  to  one  person  are  placed  or  left  on  the  land  of 
another,  with  the  permission  or  assent  of  the  latter,  the  owner  of 
the  chattels  has  an  implied  irrevocable  license  to  enter  and  remove 
them.  In  such  case  the  owner  of  land  cannot,  by  withdrawing  his 
assent  to  enter  upon  his  premises,  deprive  the  owner  of  chattels  of 
his  property,  or  prevent  him  from  regaining  possession  of  them. 
The  law  will  not  lend  its  aid  to  the  perpetration  of  a  fraud.  But  it 
is  otherwise  where  the  contract  has  not  been  executed  by  a  severance 
of  the  subject  matter  of  a  contract  of  sale  from  the  freehold.  So 
long  as  the  timber  or  other  product  of  the  soil  continues  in  its  natural 
condition,  and  no  act  is  done  by  the  vendee  towards  separation  from 
the  soil,  no  property  or  title  passes  to  the  vendee.  The  whole  rests 
in  contract.  A  revocation  of  the  license  to  enter  on  the  land  does 
not  defeat  any  valid  title;  it  does  not  deprive  an  owner  of  chattels 
of  his  property  in  or  possession  of  them.     The  contract  being  still 


52  COMMERCIAL   LAW    CASES 

executory,  no  title  has  passed  to  the  vendee,  and  the  refusal  of  the 
vendor  to  permit  the  vendee  to  enter  on  the  land  for  the  purpose  of 
disconnecting  from  the  freehold  the  property  agreed  to  be  sold  is 
only  a  breach  of  contract,  the  remedy  for  which  is  an  action  for 
damages,  as  in  the  common  case  of  a  failure  or  refusal  to  deliver 
ordinary  chattels  in  pursuance  of  a  contract  of  sale. 

II.     Contracts  not  to  be  Performed  Within  a  Year. 

Warner  v.  Texas  &  Pacific  Raihvay  Co.  164  U.  S.  418. 

The  railway  company  agreed  with  Warner,  the  plaintiff,  that 
if  he  would  grade  the  ground  for  a  switch,  and  put  on  the  ties 
at  a  certain  point,  the  railroad  would  ptit  down  the  rails  and  main- 
tain the  switch  for  shipping  purposes  of  the  plaintiff  as  long  as  he 
needed  it.  The  company  defends  an  action  brought  for  breach 
of  this  contract  on  the  ground  that  it  was  within  that  section  of 
the  statute  of  frauds  requiring  contracts  not  to  be  performed 
within  a  year  to  be  in  writing. 

Held,  that  a  contract  which  may  be  performed  within  a  year, 
even  though  it  probably  will  not  be  so  performed,  is  not  within 
the  statute. 

Gray,  J. 

It  appears  to  have  been  the  settled  construction  of  this  clause 
of  the  statute  in  England,  before  the  Declaration  of  Independence, 
that  an  oral  agreement  which,  according  to  the  intention  of  the  par- 
ties, as  shown  by  the  terms  of  the  contract,  might  be  fully  performed 
within  a  year  from  the  time  it  was  made,  was  not  within  the  statute, 
although  the  time  of  its  performance  was  uncertain,  and  might 
probably  extend,  and  be  expected  by  the  parties  to  extend,  and  did 
in  fact  extend,  beyond  the  year. 

The  several  states  of  the  Union,  in  reenacting  this  provision  of 
the  statute  of  frauds  in  its  original  words,  must  be  taken  to  have 
adopted  the  known  and  settled  construction  which  it  had  received  by 
judicial  decisions  in  England. 

12.     Contracts  Which  May  be  Performed  Within  a  Year  by 
Death. 

Doyle  V.  Dixon,  p/  Mass.  208. 

Dixon  sold  out  his  grocery  business  to  Doyle,  and  orally  agreed 
not  to  go  into  that  business  in  Chicopee  for  five  years  thereafter. 
He  did  enter  the  grocery  business  there,  two  years  after  mak- 
ing the  agreement,  and  sets  up  the  statute  of  frauds  in  defense 
to  an  action  brought  by  Doyle  for  breach  of  his  contract. 


FORMATION    OF    CONTRACTS  53 

Held,  that  a  contract  extending  over  a  term  of  years  is  not 
within  the  statute  of  frauds  if  the  contract  may  be  performed 
upon  the  death  of  the  promisor  within  a  year. 

Gray,  J. 

It  is  well  settled  that  an  oral  agreement  which  according  to  the 
expression  and  contemplation  of  the  parties  may  or  may  not  be  fully 
performed  within  a  year  is  not  within  that  clause  of  the  statute  of 
frauds,  which  requires  any  "agreement  not  to  be  performed  within 
one  year  from  the  making  thereof"  to  be  in  writing  in  order  to  main- 
tain an  action.  An  agreement  therefore  which  will  be  completely  per- 
formed according  to  its  terms  and  intention  if  either  party  should  die 
within  the  year  is  not  within  the  statute.  Thus  in  Peters  v.  West- 
borough,  19  Pick.  364,  it  was  held  that  an  agreement  to  support  a 
child  until  a  certain  age  at  which  the  child  would  not  arrive  for 
several  years  was  not  within  the  statute,  because  it  depended  upon 
the  contingency  of  the  child's  life,  and,  if  the  child  should  die  within 
one  year,  would  be  fully  performed.  On  the  other  hand,  if  the 
agreement  cannot  be  completely  performed  within  a  year,  the  fact 
that  it  may  be  terminated,  or  further  performance  excused  or  ren- 
dered impossible,  by  the  death  of  the  promisee  or  of  another  person 
within  a  year,  is  not  sufficient  to  take  it  out  of  the  statute.  It  was 
therefore  held  in  Hill  v.  Hooper,  i  Gray  131,  that  an  agreement  to 
employ  a  boy  for  five  years  and  to  pay  his  father  sums  at  stated 
periods  during  that  time  was  within  the  statute ;  for  although  by  the 
death  of  the  boy  the  services  which  were  the  consideration  of  the 
promise  would  cease,  and  the  promise  therefore  be  determined,  it 
would  certainly  not  be  completely  performed.  So  if  the  death  of 
the  promisor  within  the  year  would  merely  prevent  full  performance 
of  the  agreement,  it  is  within  the  statute;  but  if  his  death  would 
leave  the  agreement  completely  performed  and  its  purpose  fully  car- 
ried out,  it  is  not.  It  has  accordingly  been  repeatedly  held  by  this 
court  that  an  agreement  not  hereafter  to  carry  on  a  certain  business 
at  a  particular  place  was  not  within  the  statute,  because,  being  only 
a  personal  engagement  to  forbear  doing  certain  acts,  not  stipulating 
for  anything  beyond  the  promisor's  life,  and  imposing  no  duties  upon 
his  legal  representatives,  it  would  be  fully  performed  if  he  died 
within  the  year. 

An  agreement  not  to  engage  in  a  certain  kind  of  business  at 
a  particular  place  for  a  specified  number  of  years  is  within  the 
same  principle ;  for  whether  a  man  agrees  not  to  do  a  thing  for 
his  life,  or  never  to  do  it,  or  only  not  to  do  it  for  a  certain  number 
of  years,  it  is  in  either  form  an  agreement  by  which  he  does  not 
promise  that  anything  shall  be  done  after  his  death,  and  the  per- 
formance of  which  is  therefore  completed  with  his  life.  An  agreement 
to  do  a  thing  for  a  certain  time  may  perhaps  bind  the  promisor's 
representatives,  and  at  any  rate  is  not  performed  if  he  dies  within  that 
time.    But  a  mere  agreement  that  he  will  himself  refrain  from  doing: 


54  COMMERCIAL   LAW    CASES 

a  certain  thing  is  fully  performed  if  he  keeps  it  so  long  as  he  is 
capable  of  doing  or  refraining.  The  agreement  of  the  defendant  not 
to  go  into  business  again  at  Chicopee  for  five  years  was  therefore 
not  within  the  statute  of  frauds. 


13.     Nature  of  Memorandum  Required. 

Grafton  v.  Cummings.  pp  U.  S.  100. 

Cummings  sues  Grafton  on  an  agreement,  the  only  memo- 
randum of  which  was  a  paper  signed  by  Grafton  stating  that  he 
acknowledged  himself  the  purchaser  of  the  Glen  House  in  the 
White  Mountains,  for  an  amount  specified.  The  name  of  the 
vendor  was  omitted  from  the  memorandum. 

Held,  that  the  memorandum  required  by  the  statute  of  frauds 
must  specify  with  reasonable  certainty  the  parties  to  the  trans- 
action. 

Miller,  J. 

The  statute  not  only  requires  that  the  agreement  on  which  action 
is  brought  or  some  memorandum  thereof,  shall  be  signed  by  the 
party  to  be  charged,  but  that  the  agreement  or  memorandum  shall 
be  in  writing.  In  an  agreement  of  sale  there  can  be  no  contract 
without  both  a  vendor  and  a  vendee.  There  can  be  no  purchase 
without  a  seller.  There  must  be  a  sufficient  description  of  the  thing 
sold  and  of  the  price  to  be  paid  for  it.  It  is,  therefore,  an  essential 
element  of  a  contract  in  writing  that  it  shall  contain  within  itself 
a  description  of  the  thing  sold  by  which  it  can  be  known  or  identified, 
of  the  price  to  be  paid  for  it,  of  the  party  who  sells  it,  and  the  party 
who  buys  it.  There  is  a  defect  in  this  memorandum  in  giving  no 
indication  of  the  party  who  sells.  If  Grafton  was  bound  to  purchase, 
it  was  because  somebody  was  bound  to  sell.  If  he  was  bound  to  pay, 
somebody  was  bound  to  receive  the  money  and  deliver  the  considera- 
tion for  the  price  so  paid. 

There  can  be  no  bargain  without  two  parties.  There  can  be  no 
valid  agreement  in  writing  without  these  parties  are  named  in  such 
manner  that  some  one  whom  he  can  reach  is  known  to  the  other 
to  be  bound  also.  No  one  is  bound  in  this  paper  to  sell  the  Glen 
House,  or  to  convey  it.  No  one  is  mentioned  as  the  owner,  or  the 
other  party  to  this  contract.  Let  it  be  understood  that  we  are  not 
discussing  the  question  of  mutuality  in  the  obligation,  for  it  may  be 
true,  that  if  a  vendor  was  named  in  this  paper,  the  offer  to  perform 
on  his  part  would  bind  the  party  who  did  sign.  But  Grafton  did 
not  agree  to  buy  this  property  of  anybody  who  might  be  found  able 
and  willing  to  furnish  him  a  title.  He  was  making  a  contract  which 
required  a  vendor  and  a  vendee  at  the  time  it  was  made,  and  he  is 
liable   only   to   that   vendor.     The   name   of   that   vendor,   or   some 


FORMATION    OF    CONTRACTS  55 

designation  of  him  which  could  be  recognized  without  parol  proof 
extraneous  to  the  instrument,  was  an  essential  part  of  that  instrument 
to  its  validity. 

14.  Nature  of  Memorandum  Required. 

Desmarais  v.  Taft.  210  Mass.  560. 

Taft  agreed  to  sell  Desmarais  a  parcel  of  land,  and  the  follow- 
ing memorandum  of  the  transaction  was  drawn  up: 

"$100.00  Northbridge,  Mass.,  Aug.  7,  1900. 

"Received  one  hundred  dollars  from  E.  Desmarais  in  part  pay- 
ment for  a  piece  of  land  next  to  Pelequin,  seventy  feet  on  the 
road  and  back  to  an  old  wall. 

"Elenor  Taft." 

Held,  that  the  memorandum  was  sufficient  to  satisfy  the  statute 
of  frauds. 

Rugg,  C.  J. 

The  statute  of  frauds  requires  a  memorandum  "to  contain  a 
description  of  the  land  sufficient  for  purposes  of  identification,  when 
read  in  the  light  of  all  the  circumstances  of  ownership  of  the  prop- 
erty by  the  vendor.  Attendant  circumstances  may  be  shown  outside 
the  writing  and  by  parol  for  the  purpose  of  interpreting  and  applying 
the  memorandum."  On  the  other  hand,  a  description  which,  when 
applied  to  the  physical  features  upon  the  surface  of  the  earth  and 
read  in  the  light  of  the  facts  surrounding  the  parties  at  the  time  of 
its  execution,  fails  to  identify  particular  land  as  alone  conforming 
to  its  terms,  does  not  satisfy  the  statute  of  frauds.  Objects  and 
circumstances  can  be  resorted  to  for  applying  and  translating  the 
words  of  the  memorandum  into  terms  of  land.  The  language  of 
the  memorandum  is  not  unlike  that  which  country  folk  would  use 
when  they  meant  a  strip  with  parallel  sides.  Although  verging  to- 
ward vagueness,  the  description  in  the  memorandum  applied  to  the 
facts  on  the  surface  of  the  earth  identifies  a  specific  tract  of  land. 

The  exact  consideration  for  the  conveyance  under  our  authori- 
ties need  not  be  stated  in  the  memorandum. 

15,  Signature  of  Memorandum  by  Party  to  be  Charged. 

Kilday  v.  Schanciipp.  gi  Conn.  2Q. 

Mrs.  Kilday  agreed  to  sell  real  estate  to  Schancupp,  who,  as  a 
memorandum  of  the  transaction,  wrote  out  a  statement  reciting 
that  the  property  was  sold  to  him  on  certain  terms.  This  instru- 
ment was  signed  by  Mrs.  Kilday  but  Schancupp's  signature 
was  not  on  the  document  unless  his  writing  his  name  as  the  pur- 


56  COMMERCIAL    LAW    CASES 

chaser  constituted  such  signature.  He  defends  an  action  brought 
for  refusal  to  carry  out  the  contract  on  the  ground  that  there  was 
no  memorandum  signed  by  him. 

Held,  that  the  writing  of  his  name  by  the  defendant  in  the 
body  of  the  memorandum  constituted  a  proper  signature, 

Wheeler,  J. 

General  Statutes,  1089,  provides  that  "no  civil  action  shall  be 
maintained  .  .  .  upon  any  agreement  for  the  sale  of  real  estate,  or  any 
interest  in  or  concerning  it,  .  .  .  unless  such  agreement,  or  some  memo- 
randum thereof,  be  made  in  writing,  and  signed  by  the  party  to  be 
charged  therewith,  or  his  agent."  We  have  said  that  our  statute 
does  not  make  agreements  not  made  in  this  way  invalid,  but  pre- 
vents their  proof  unless  by  such  a  writing.  It  is  immaterial  whether 
the  action  be  one  for  specific  performance,  or  for  damages  for  the 
breach  of  a  contract  of  sale  of  land.  The  proof  must  be  in  the 
manner  provided  by  our  statute ;  and  the  agreement  in  its  essentials 
must  be  the  same  in  either  action. 

The  agreement  must  have  been  signed  by  this  defendant,  since 
he  is  the  party  to  be  charged.  This  agreement  was  caused  to  be  pre- 
pared by  the  defendant  and  it  begins,  "Sold  to  J.  Schancupp."  This 
is  the  written  declaration  of  the  defendant  himself  that  the  plaintiff 
has  sold  him  the  property  described,  upon  the  terms  described, 
and  likewise  it  is  his  written  declaration  of  purchase  of  this  prop- 
erty upon  the  named  terms.  The  statute  is  intended  to  relieve 
against  fraud;  to  hold  that  this  defendant,  by  writing  his  name  in 
the  body  of  this  instrument  instead  of  at  its  end,  did  not  sign 
the  instrument  would  help  perpetrate,  instead  of  prevent,  a  wrong. 
An  instrument  signed  by  one  in  any  part  of  it  after  the  body  of 
it  is  written,  or  signed  in  any  part  and,  when  completed,  produced 
from  his  custody,  must  be  taken  to  be  the  instrument  of  the  party 
so  signing.  Under  these  circumstances  he  authenticates  by  his 
signature,  or  by  the  signature  to  the  instrument  produced  from  his 
custody,  the  instrument  so  signed,  and  such  a  signature  fully  meets 
the  requirements  of  the  statute  of  frauds.  The  authorities  are  equally 
decisive  that  the  signature  may  be  printed  or  written.  And  we  have 
held  that  a  signature  by  a  rubber  stamp  made  by  an  agent  duly 
authorized  is  a  signature  within  the  statute. 

16.     Effect  of  Non-Compliance  with  the  Statute. 

Bacon  v.  Parker.  1^7  Mass.  sog. 

Bacon  owned  a  warehouse  on  Pearl  Street  in  Boston,  which 
was  burned  in  the  Great  Fire.  Parker  and  others  orally  agreed 
that  if  Bacon  would  buy  the  adjoining  land  and  build  a  warehouse 
on  both  parcels,  they  would  take  a  five  year  lease.  Bacon  put  up 
the  building  on  both  lots,   making  additions  and   alterations  at 


FORMATION    OF    CONTRACTS  57 

the  request  of  the  defendants,  and  now  sues  them  for  failure  to 
take  the  lease. 

Held,  that  the  building  of  the  warehouse  was  not  such  per- 
formance that  it  would  take  the  contract  out  of  the  operation  of 
the  statute  of  frauds. 

Holmes,  J. 

It  has  been  held  repeatedly  that,  when  a  person  pays  money,  ren- 
ders service,  or  conveys  property  as  the  stipulated  consideration 
of  a  contract  within  the  statute  of  frauds,  if  the  other  party  re- 
fuses to  perform  his  part,  and  sets  up  the  statute,  the  void  contract 
shall  not  be  relied  on  as  a  means  to  accomplish  a  fraud,  and  keep 
what  was  furnished  as  quid  pro  quo  for  nothing.  The  fact  that 
words  were  spoken  in  the  form  of  a  contract  which  did  not  bind 
the  speaker  and  which  is  repudiated,  is  not  allowed  to  displace  or 
override  the  obligation  which  would  otherwise  arise  from  the  receipt 
and  retention  of  value  on  the  understanding  that  value  is  to  be 
returned. 

These  cases,  however,  do  not  apply  when  that  which  has  been 
done  is  not  the  contemplated  consideration  of  any  promise,  void 
or  otherwise,  but  merely  a  step  taken  by  one  party  as  a  means  to 
enable  him  to  furnish  the  consideration.  The  mode  in  which  one 
party  to  a  bargain  shall  enable  himself  to  do  what  he  has  agreed 
to  do,  is  no  concern  of  the  other  party,  and  is  no  part  of  the 
contract.  In  the  present  case,  what  the  defendants  were  to  have 
was  a  five  years'  lease  of  certain  land  with  certain  structures  upon 
it;  what  they  were  to  pay  was  rent.  If  the  structures  had  been 
built  by  trespassers,  the  plaintiff  would  still  have  tendered  the 
whole  consideration  stipulated  for,  if  he  had  tendered  a  lease  in 
due  time.  What  the  defendants  agreed  to  pay  for  was  the  right  to 
occupy  the  land  when  built  upon,  not  the  purchase  or  erection. 
That  was  the  only  thing  they  requested  in  such  a  sense  that  the 
law  could  found  a  promise  upon  their  act.  A  request  is  only  im- 
portant when  it  implies  a  promise  to  pay  for  the  thing  requested. 
The  request  to  purchase  or  build  did  not  imply  a  promise  to  pay 
for  doing  either,  because  both  were  simply  means  enabling  the  plain- 
tiff to  furnish  the  defendants  what  they  were  to  pay  for.  That  they 
have  never  had,  and  therefore  they  are  not  bound  to  pay  anything. 


III. 

CONSIDERATION. 

Consideration,  the  quid  pro  quo  required  in  all  contracts  except 
contracts  under  seal,  in  which  the  binding  assent  of  the  parties 
exists  at  law  regardless  of  consideration,  is  any  benefit  to  the 
promisor  or  detriment  to  the  promisee.     The  amount  and  nature 


58  COMMERCIAL    LAW    CASES 

of  this  benefit  or  detriment  are  immaterial,  so  long  as  the  parties 
change  their  legal  position.  Formerly  a  distinction  was  made  be- 
tween "good"  and  "valuable"  consideration.  Good  consideration, 
otherwise  known  as  "consideration  of  blood,"  was  based  on  natural 
affection  assumed  to  be  inherent  in  any  agreement  between  near 
relatives  regardless  of  tangible  benefit  or  detriment.  At  the  pres- 
ent time,  the  idea  of  good  consideration  has  practically  disappeared 
and  the  courts  recognize  only  valuable  consideration,  i.e.,  actual 
benefit  or  detriment. 

Any  valuable  consideration  will  support  a  contract  regardless 
of  the  relative  value  of  the  goods  or  services  exchanged,  except 

(i)  in  the  case  of  the  exchange  of  even  values,  generally 
money  values,  when  inadequacy  of  consideration  is  a 
defense ; 

(2)  in  equity,  where  specific  performance  will  not  be 
granted  if  the  consideration  is  inadequate. 

Consideration  may  consist  of  a  promise  to  do,  or  to  forbear 
from  doing,  any  act  which  one  can  legally  do.  Doing  what  one 
isi)ound  to  do  is  as  a  rule  no  consideration.  Such  a  promise  to  do 
what  one  is  bound  to  do  often  takes  the  form  of  part  performance 
of  an  obligation  in  consideration  of  a  release  of  the  remainder. 
Such  a  release  is  not  good  unless  the  release  is  under  seal,  unless 
it  represents  a  compromise  of  an  unliquidated  claim,  or  unless 
somecning  additional  to  the  original  obligation  is  done  or  promised. 
This  rule  does  not  apply  to  a  debt  not  yet  due.  Courts  uphold 
compositions  with  creditors  (agreements  whereby  the  debtor 
meets  his  obligations  by  paying  each  creditor  a  certain  pro- 
portion of  his  debt)  upon  the  somewhat  unsatisfactory  theory 
that  the  consideration  is  to  be  found  in  the  agreement  of  all  the 
creditors  or  in  the  efiforts  of  the  debtor  to  secure  the  composition. 
This  proposition  rests  ultimately  upon  broad  grounds  of  public 
policy  rather  than  upon  technical  theories  of  consideration.  The 
same  principle  is  to  be  found  in  promises  of  additional  compen- 
sation for  work  already  contracted  to  be  done.  The  general 
rule  is  that  in  such  cases  there  is  no  consideration  for  the  promise 
of  additional  compensation,  although  some  jurisdictions  hold  that 
consideration  arises  out  of  an  election  of  the  promisor  to  secure 
the  actual  work  rather  than  damages  for  breach  of  contract.  Yet 
other  jurisdictions,  while  holding  to  the  general  rule,  consider  that 
the  original  contract  is  discharged  by  waiver  and  a  new  one  sub- 
stituted. 

The  consideration  must  be  definite.  It  may  be  conditional. 
In  this  connection,  an  agreement  to  supply  all  that  a  party  may 
order   is  to  be  distinguished   from  an  agreement  to   supply  all 


FORMATION    OF    CONTRACTS  59 

goods  that  a  party  uses  in  his  business.  In  such  cases,  the  agree- 
ment lo  supply  all  orders  is  without  consideration  because  there 
is  no  obligation  to  order,  whereas  an  agreement  to  supply  all 
goods  used  in  a  business  requires  an  order  if  any  such  goods 
are  used  in  the  business.  The  consideration  must  usually  be 
present  or  future;  in  general,  a  past  consideration  will  not  sup- 
port a  contract  unless  it  was  given  at  the  request  of  the  promisor ; 
unless  it  represents  a  previous  debt  discharged  by  law ;  or  unless 
the  consideration  for  an  entire  transaction  is  part  past  and  part 
present.  Most  courts  hold  that  a  contract  intended  to  benefit 
a  third  person  may  within  limits  be  enforced  by  that  person, 
but  by  the  English  and  Massachusetts  rule,  only  those  parties 
who  are  privy  to  the  consideration  may  sue.  This  rule  applies 
to  subscriptions  for  the  benefit  of  a  third  person  who  tries  to 
enforce  the  subscription.  It  is  generally  held  that  such  a  sub- 
scription is  not  enforceable  until  some  promise  or  act  has  been 
done  by  the  beneficiary  in  accordance  with  it,  whereupon  it  becomes 
a  binding  obligation  on  the  theory  that  it  was  an  offer  accepted 
by  that  beneficiary.  By  statute,  beneficiaries  under  insurance 
policies  may  sue  upon  them. 


I.     Nature  of  Consideration. 

Brady  v.  Equitable  Trust  Co.   ij8  Ky.  6pj. 

Dr.  Brady,  who  was  interested  in  a  cooperage  concern,  over- 
drew the  account  of  the  company  at  the  bank.  Mrs.  Brady  gave 
a  mortgage  and  note  for  $3,000  to  the  bank  to  secure  the  defi- 
ciency, and  in  addition  deposited  with  the  bank  a  note  of  the  com- 
pany given  to  her  to  secure  her  own  note.  The  bank  forbore  for 
more  than  four  years  to  sue  Dr.  Brady.  The  plaintiff,  an  assignee 
of  the  first  bank,  sues  Mrs.  Brady  on  her  note.  Her  defense  is 
that  as  against  her  there  was  no  consideration  for  the  execution 
of  the  mortgage. 

Held,  that  forbearance  on  the  part  of  the  bank  to  press  its 
claim  against  Dr.  Brady  was  sufficient  consideration  for  the  note. 

Hurt,  J. 

A  consideration,  in  a  legal  sense,  sufficient  to  uphold  a  contract 
may  be  a  benefit  to  the  promisor  or  a  loss,  forbearance  or  detri- 
ment suffered  by  the  promisee.  To  make  a  binding  obligation, 
it  is  not  necessary  that  some  benefit  should  accrue  thereby  to  the 
obligor.  It  is  sufficient  if  the  obligee  suffers  some  detriment  or 
prejudice.  Indeed,  there  is  a  consideration  if  the  promisee  in  re- 
turn  for  the   promise   does   anything   legal   which   he   is   not   bound 


60  COMMERCIAL   LAW    CASES 

to  do,  or  refrains  from  doing  anything  which  he  has  a  right  to  do, 
whether  there  is  any  actual  loss  or  detriment  to  him  or  actual 
benefit  to  the  promisor  or  not. 

2.     Good  and  Valuable  Consideration. 

Groves  v.  Groves.  65  Oh.  St.  442. 

Groves  acquired  title  to  property  by  a  deed  from  his  father 
which  recited  that  Groves  had  paid  $9,165  for  the  land,  whereas 
in  fact  he  had  paid  nothing.  Upon  the  death  of  Groves,  his 
widow,  the  plaintiff,  claims  complete  ownership  of  the  property 
under  a  statute  which  provides  that  a  widow  shall  have  complete 
ownership  of  real  estate  acquired  by  her  husband  by  purchase. 
The  defendants,  Groves'  brother  and  sister,  claim  the  estate  subject 
to  a  life  interest  of  the  widow,  under  a  provision  in  the  statute 
which  gives  a  surviving  widow  only  a  life  estate  in  land  acquired 
by  her  husband  otherwise  than  by  purchase. 

Held,  that  the  land,  though  really  acquired  by  gift,  must  be 
considered  to  be  acquired  by  purchase  on  account  of  the  fact 
that  the  heirs  cannot  contradict  the  recitals  in  the  deed. 

Bitrkct,  J. 

If  the  land  came  to  Groves  by  purchase,  his  widow  took  it  in 
fee.  but  if  it  came  to  him  by  deed  of  gift,  she  took  it  for  life  only, 
with  remainder  to  his  brother  and  sister. 

Upon  the  face  of  the  deed,  as  it  recites  a  money  consideration, 
the  land  came  to  him  by  purchase.  In  this  state  title  to  lands  may 
be  acquired  in  four  ways,  by  descent,  by  devise,  by  deed  of  gift,  and 
by  purchase.  Lands  that  are  not  acquired  by  descent,  by  devise,  or 
by  deed  of  gift,  are  acquired  by  purchase. 

At  common  law  a  conveyance  of  real  estate  as  a  gift  was  sup- 
ported by  a  good  consideration  only,  but  some  eminent  judges  have 
held  that  such  a  deed  would  be  valid  without  any  consideration 
whatever;  but  the  weight  of  authority  seems  not  to  go  to  that  ex- 
tent, although  sound  reason  would  seem  to  support  it.  Blackstone 
regards  a  deed  supported  by  no  consideration  as  of  no  efifect,  and 
as  inuring  to  the  use  of  the  grantor  only.  "The  consideration  may 
be  either  a  good  or  a  valuable  one.  A  good  consideration  is  such 
as  that  of  blood,  or  of  natural  love  and  affection,  when  a  man  grants 
an  estate  to  a  near  relation ;  being  founded  on  motives  of  generosity, 
prudence,  and  natural  duty;  a  valuable  consideration  is  such  as 
money,  marriage,  or  the  like,  which  the  law  esteems  an  equivalent 
given  for  the  grant;  and  is  therefore  founded  in  motives  of  justice." 

Blackstone  seems  to  regard  marriage  as  a  valuable  considera- 
tion, rather  than  as  a  good  one,  but  marriage  consummated  is  a 
good  consideration,  and  marriage  to  be  thereafter  consummated,  is 
a  valuable  consideration.  Failure  to  note  this  distinction  often 
leads  to  confusion. 

It  is  clear  that  a  deed  of  conveyance  by  a  grantor  to  a  near 


FORMATION    OF    CONTRACTS  '     6l 

relative  by  blood  for  no  consideration  other  than  natural  love  and 
affection,  and  so  expressed  in  the  deed,  is  a  deed  of  gift  under  our 
statute  of  descent  and  distribution.  If  a  valuable  consideration,  such 
as  money  or  marriage  to  be  thereafter  consummated,  is  expressed, 
the  title  passes  by  purchase,  and  not  by  deed  of  gift. 

The  parties  by  their  deed  impress  upon  the  title  the  character 
which  it  is  to  bear  in  the  hands  of  the  grantee,  and  those  coming 
after  him.  If  they  say  the  consideration  is  good  only,  they  thereby 
impress  upon  the  title  the  character  of  a  deed  of  gift.  If  they  say 
that  the  consideration  is  a  valuable  one,  they  thereby  impress  upon 
the  title  the  character  of  title  by  purchase. 

In  this  case  the  deed  expresses  a  money  consideration,  and  the 
title  is  therefore  on  the  face  of  the  deed  a  title  by  purchase. 

3.  Consideration  in  Sealed  Instruments. 

Page  v.  Triifant.  2  Mass.  /jfp. 

The  defendant,  Trufant,  who  was  living  apart  from  his  wife, 
gave  a  bond  running  to  Page  in  return  for  which  Truf ant's 
wife  released  him  and  his  estate  from  all  claims  for  the  support 
and  education  of  their  daughter.    Page  sues  upon  the  bond. 

Held,  that  actual  consideration  is  unnecessary  in  a  sealed  in- 
strument. 

Sczvall,  J.. 

The  amount  of  the  defendant's  pleas  is,  that  the  wife  not  being 
bound  by  her  covenants  in  the  articles  of  separation,  and  no  cov- 
enants having  been  made  by  the  plaintiff  pursuant  to  his  engagement, 
there  was  therefore  no  consideration  for  this  bond. 

Sedgwick,  J. 

The  question,  then,  brought  before  the  court  is,  whether  the 
consideration  for  which  this  bond  was  given  is  sufficient  to  support 
an  action  upon  it.  Every  bond,  from  the  solemnity  of  the  instru- 
ment, carries  with  it  an  internal  evidence  of  a  good  consideration; 
and  is  to  be  supported  in  a  court  of  law,  except  facts  are  disclosed 
to  the  court  whereby  the  consideration  appears  to  be  immoral,  il- 
legal, or  against  the  policy  of  the  law.  These  pleadings  show  neither. 
Separate  maintenance  is  lawful,  and  a  bond  given  to  secure  it  to 
a  wife  is  meritorious,  and  therefore  valid  and  binding.  The  de- 
fendant's pleas  are  insufficient. 

4.  Exchange  of  Even  Values. 

Schnell  v.  Nell.  //  Ind.  2g. 

Schnell's  wife  made  a  will  leaving  $200  to  Nell,  among 
others.  She  died  leaving  no  estate.  Schnell  made  a  written  agree- 
ment with  Nell  and  the  two  others,  that  he  personally  would  pay 


62  COMMERCIAL   LAW    CASES 

$200  to  each.  The  agreement  contained  an  averment  that  it 
was  executed  in  consideration  of  one  cent,  of  the  love  and  affec- 
tion which  he  bore  his  wife,  of  the  fact  that  she  had  done  her 
part  in  the  acquisition  of  his  property,  and  of  the  fact  that  she 
had  expressed  her  desire  that  the  money  should  be  paid. 

Held,  that  a  promise  to  pay  a  larger  sum  in  consideration  of 
a  smaller  sum  is  not  valid  consideration. 

Perkins,  J. 

The  consideration  of  one  cent  will  not  support  the  promise 
of  Schnell.  It  is  true  that  as  a  general  proposition,  inadequacy 
of  consideration  will  not  vitiate  an  agreement.  But  this  doctrine 
does  not  apply  to  a  mere  exchange  of  sums  of  money,  of  coin,  whose 
value  is  exactly  fixed,  but  to  the  exchange  of  something  of,  in  itself, 
indeterminate  value,  for  money,  or,  perhaps,  for  some  other  thing 
of  indeterminate  value.  In  this  case,  had  the  one  cent  mentioned 
been  some  particular  one  cent,  a  family  piece,  or  ancient,  remark- 
able coin,  possessing  an  indeterminate  value  extrinsic  from  its  simple 
money  value,  a  different  view  might  be  taken.  As  it  is,  the  mere 
promise  to  pay  six  hundred  dollars  for  one  cent,  even  had  the  portion 
of  that  cent  due  from  the  plaintiff  been  tendered,  is  an  unconscion- 
able contract,  void,  at  first  blush,  upon  its  face,  if  it  be  regarded  as 
an  earnest  one.  The  consideration  of  one  cent  is,  plainly,  in  this 
case,  merely  nominal,  and  intended  to  be  so.  As  the  will  and  testa- 
ment of  Schnell's  wife  imposed  no  legal  obligation  upon  him  to 
discharge  her  bequests  out  of  his  property,  and  as  she  had  none  of 
her  own,  his  promise  to  discharge  them  was  not  legally  binding  upon 
him  on  that  ground.  A  moral  consideration,  only,  will  not  support 
a  promise.  And  for  the  same  reason,  a  valid  consideration  for  his 
promise  cannot  be  found  in  the  fact  of  a  compromise  of  a  disputed 
claim ;  for  where  such  claim  is  legally  groundless,  a  promise  upon 
a  compromise  of  it,  or  of  a  suit  upon  it,  is  not  legally  binding. 
There  was  no  mistake  of  law  or  fact  in  this  case,  as  the  agreement 
admits  the  will  inoperative  and  void.  The  promise  was  simply 
one  to  make  a  gift.  The  past  services  of  his  wife,  and  the  love  and 
affection  he  had  borne  her,  are  objectionable  as  legal  considerations 
for  Schnell's  promise,  on  two  grounds: 

( 1 )  They  are  past  considerations. 

(2)  The  fact  that  Schnell  loved  his  wife,  and  that  she  had 
been  industrious,  constituted  no  consideration  for  his  prom- 
ise to  pay  J.  B.  Nell  and  tlic  Lorenzes  a  sum  of  money. 

Whether,  if  his  wife  in  her  lifetime  had  made  a  bargain  with 
Schnell,  that,  in  consideration  of  his  promising  to  pay  after  her 
death  to  the  persons  named,  a  sum  of  money,  she  would  be  industrious 
and  worthy  of  his  affection,  such  a  promise  would  have  been  valid 
and  consistent  with  public  poHcy,  we  need  not  decide.  Nor  is  the 
fact  that  Schnell  now  venerates  the  memory  of  his  deceased  wife 
a  legal  consideration  for  a  promise  to  pay  any  third  person  money. 


FORMATION    OF    CONTRACTS  63 

5.  Adequacy  of  Consideration  in  Equity. 

Margraf  v.  Muir.  57  N.  Y.  135. 

Mrs.  Muir,  ignorant  of  the  real  value  of  certain  property  fairly 
worth  $2000,  agreed  to  sell  it  to  Margraf  for  $800.  Margraf 
seeks  specific  performance  of  the  contract. 

Held,  that  equity  will  not  decree  specific  performance  of  a 
contract  if  the  consideration  is  unfair. 

Earl,  C. 

This  was  an  unconscionable  contract  and  could  not  be  specifi- 
cally enforced  on  the  ground  of  the  inadequacy  of  the  considera- 
tion. The  plaintiff  lived  near  the  lot  and  knew  its  value.  The 
defendant  lived  at  a  distance  and  did  not  know  its  value.  While 
the  plaintiff  did  not  make  any  misrepresentations,  he  concealed  his 
knowledge  of  the  recent  rise  in  value  of  the  lot  and  took  advantage 
of  her  ignorance,  and  thus  got  from  her  a  contract  to  convey  to 
him  the  lot  for  but  a  little  more  than  one-third  of  its  value.  Such 
a  contract,  it  is  believed,  has  never  yet  been  enforced  in  a  court 
of  equity  in  this  country.  When  a  contract  for  the  sale  of  lands  is 
fair  and  just  and  free  from  legal  objection,  it  is  a  matter  of  course 
for  courts  of  equity  to  specifically  enforce  it.  But  they  will  not 
decree  specific  performance  in  cases  of  fraud  or  mistake,  or  of 
hard  and  unconscionable  bargains,  or  when  the  decree  would  pro- 
duce injustice,  or  when  such  a  decree  would  be  inequitable  under 
all  circumstances. 

Formerly,  in  case  courts  of  equity  refused  specific  performance 
on  the  ground  of  mere  inadequacy  of  consideration,  the  party  claim- 
ing performance  still  had  his  remedy  by  a  new  action  in  the  courts 
of  law  for  damages  for  the  breach  of  contract,  and,  in  such  courts, 
mere  inadequacy  of  consideration,  not  so  great  as  to  be  evidence  of 
fraud,  was  never  a  defense.  This  practice  has,  however,  been 
changed  by  the  Code;  and,  now,  equitable  and  legal  jurisdiction 
being  united  in  the  same  court,  a  party  can  unite  in  the  same  com- 
plaint both  legal  and  equitable  causes  of  action  arising  out  of  the  same 
transaction. 

In  this  case  the  referee  denied  the  equitable  relief,  but  awarded 
damages  for  the  breach  of  the  contract,  and  in  this  he  did  not  err, 
provided  he  adopted  the  proper  rule  of  damage. 

6.  Forbearance. 

Silver  v.  Graves.  210  Mass.  26. 

The  plaintiffs,  three  sisters  of  the  defendant,  Graves,  executor 
of  their  father's  will,  sue  him  on  his  agreement  that  if  they 
would  withdraw  from  a  contest  of  the  will,  which  gave  to  the 
defendant    $750    and    only    $100    to    each    of    the    plantiffs,    he 


64  COMMERCIAL    LAW    CASES 

would  "give  them  a  sum  of  money  that  would  be  satisfactory." 
The  plaintiffs  withdrew  their  appearance,  the  will  was  allowed, 
and  they  sue  to  recover  for  breach  of  the  agreement. 

Held,  that  forbearance  to  sue  is  an  adequate  consideration,  and 
that  the  consideration  was  sufficiently  definite. 

Rugg,  J. 

The  only  element  left  undetermined  in  this  contract  is  that 
of  price.  But  this  is  not  infrequently  found  to  be  indefinite  in 
contracts  of  sale  and  for  work  and  labor.  It  is  not  necessary  that 
the  subject  matter  of  such  a  contract  should  possess  a  price  in  the 
market  or  be  bartered  commonly  in  trade.  It  is  enough  if  there  is 
a  reasonable  value,  which  can  be  ascertained  by  the  practical  methods 
of  trial.  The  difficulty  of  fixing  the  compensation  is  no  greater 
than  occurs  in  many  cases. 

There  is  no  doubt  that  the  forbearance  to  prosecute  a  genuine 
contest  in  the  courts  is  a  sufficient  consideration  for  a  promise. 
In  order  that  it  may  have  this  effect,  however,  the  intention  must 
be  sincere  to  carry  on  a  litigation  which  is  believed  to  be  well 
grounded  and  not  false,  frivolous,  vexatious  or  unlawful  in  its  nature. 
The  abandonment  of  an  honest  purpose  to  carry  on  a  litigation,  even 
though  its  character  be  not  such,  either  in  law  or  fact  or  both,  as 
ultimately  to  commend  itself  to  the  judgment  of  the  tribunal  which 
finally  passes  upon  the  question,  is  a  surrender  of  something  of 
value,  and  is  a  sufficient  consideration  for  a  contract.  But  the 
giving  up  of  litigation  which  is  not  founded  in  good  faith,  and  which 
does  violence  to  an  enlightened  sense  of  justice  in  view  of  the 
knowledge  of  the  one  making  the  concession,  is  not  the  relinquishment 
of  a  thing  of  value,  and  does  not  constitute  a  sufficient  consideration 
for  a  contract.  As  was  said  by  Morton,  J.,  in  Mackin  v.  Dwyer,  205 
Mass.  492,  "A  threat  to  contest  the  will,  merely  for  the  purpose  of 
compelling  the  defendant  to  settle  with  her  and  buy  his  peace  without 
any  intention  on  her  part  of  actually  contesting  the  will  if  no  such 
settlement  was  made,  would  not  be  sufficient  and  would  not  constitute 
a  valid  consideration  for  the  defendant's  promise." 

7.     Part  Payment  of  Debt  Not  Yet  Due  as  Consideration. 

Brooks  V.  White.  2  Mete.  (Mass.)  28^. 

Brooks  &  Saunders  held  Keith,  White  &  Company's  note  for 
$865.  Before  the  note  became  due,  the  plaintiffs  accepted  from 
White,  one  of  the  partners,  two  notes  of  third  persons  for  a 
smaller  sum  in  settlement  of  all  demands.  They  now  try  to  col- 
lect the  balance  from  White. 

Ihid,  that  the  payment  of  a  smaller  amount  before  the  larger 
amount  becomes  due  is  good  consideration  for  a  release  of  the 
larger  auKjunt. 


FORMATION  OF  CONTRACTS  6$ 

Dewey,  J. 

The  general  principle,  that  the  acceptance  of  a  less  sum  in 
money  than  is  actually  due  cannot  be  a  satisfaction  and  will  not 
operate  to  extinguish  the  whole  debt,  although  agreed  by  the  cred- 
itor to  be  received  upon  such  condition,  seems  to  be  recognized  in 
books  of  unquestionable  authority.  The  reason  of  the  rule  is  that 
there  must  be  some  consideration  for  the  relinquishment  of  the 
excess  due  beyond  the  sum  paid;  something  to  show  a  possibility  of 
benefit  to  the  party  thus  relinquishing  a  legal  right ;  otherwise  the 
agreement  is  midum  pactum.  So  in  Pinnel's  case,  5  Co.  117,  where 
it  was  resolved  that  payment  of  a  less  sum,  on  the  day,  in  satisfac- 
tion of  the  greater,  cannot  be  a  satisfaction  of  the  whole,  because 
it  appears  to  the  judges  that  by  no  possibility  a  less  sum  of  money 
can  be  a  satisfaction  to  the  plaintiff  for  a  greater  sum:  But  the  gift 
of  a  horse  or  the  like,  in  satisfaction,  is  good;  for  it  shall  be  intended 
that  the  horse  might  be  more  beneficial  to  the  party  than  the  money, 
or  he  would  not  have  accepted  it  in  satisfaction. 

The  foundation  of  the  rule  seems  therefore  to  be,  that  in  the  case 
of  the  acceptance  of  a  less  sum  of  money  in  discharge  of  a  debt, 
inasmuch  as  there  is  no  new  consideration,  no  benefit  accruing  to 
the  creditor,  and  no  damage  to  the  debtor,  the  creditor  may  violate 
with  legal  impunity  his  promise  to  his  debtor,  however  freely  and 
understandingly  made.  This  rule,  which  obviously  may  be  urged  in 
violation  of  good  faith,  is  not  to  be  extended  beyond  its  precise 
import ;  and  whenever  the  technical  reason  for  its  application  does 
not  exist,  the  rule  itself  is  not  to  be  applied.  Hence  judges  have 
been  disposed  to  take  out  of  its  application  all  those  cases  where 
there  was  any  new  consideration,  or  any  collateral  benefit  received 
by  the  payee,  which  might  raise  a  technical  consideration,  although 
it  was  quite  apparent  that  such  consideration  was  far  less  than  the 
amount  of  the  sum  due.  Thus,  where  any  other  articles  than  money 
are  received  and  agreed  to  be  accepted  in  full  satisfaction  of  a  debt, 
the  court  will  not  estimate  their  value  in  money's  worth,  but  hold 
the  consideration  to  be  good,  and  the  promise  to  discharge  the  entire 
debt  a  valid  contract.  The  distinction  was  recognized  in  the  resolu- 
tions in  Pinnel's  case,  already  cited.  In  Boyd  v.  Hitchcock,  20  Johns. 
76,  the  receiving  of  a  note  of  hand  for  a  less  sum  than  was  due, 
with  the  name  of  another  person  as  promisor  or  indorser,  where  the 
creditor  agreed  to  accept  the  same  as  a  satisfaction  of  the  whole 
debt,  was  held  a  valid  discharge,  as  an  accord  and  satisfaction.  In 
that  case,  the  courts  say,  "here  was  a  beneficial  interest  acquired, 
and  a  valuable  consideration  received  by  the  plaintiffs,  when  they 
agreed  to  accept  less  than  their  whole  demands." 

But  there  is  another  principle  which  the  facts  in  the  present 
case  authorize  us  to  apply,  which  is  equally  fatal  to  the  maintenance 
of  the  technical  objection  relied  on  by  the  plaintiffs.  The  same  an- 
cient authority  which  declares  that  the  payment  and  acceptance  of 
a  less  sum,  on  the  day  the  debt  becomes  due,  in  satisfaction  of  a 


66  COMMERCIAL    LAW    CASES 

greater,  is  no  defense  beyond  the  amount  paid,  also  declares  that 
the  payment  and  acceptance  of  a  less  sum  before  the  day  of  payment 
has  arrived,  in  satisfaction  of  the  whole,  would  be  a  good  accord 
and  satisfaction;  for  it  is  said,  peradventure  parcel  of  the  sum  before 
the  day  it  fell  due  would  be  more  beneficial  to  him  than  the  whole 
at  the  day;  and  the  value  of  the  satisfaction  is  not  material.  "If 
the  obligor  pay  a  lesser  sum,  either  before  the  day,  or  at  another 
place  than  is  limited  by  the  condition,  and  the  obligee  receiveth  it, 
this  is  a  good  satisfaction."  The  transfer  of  the  notes  was  therefore 
a  sufficient  consideration  for  a  promise  by  the  plaintiffs  to  receive 
them  in  full  discharge  of  the  note. 

8.     Part  Payment;   Effect  of  Voucher  Check. 

Whittaker  CJiain  Tread  Co.  v.  Standard  Auto  Supply  Co.  216 
Mass.  204. 

The  Auto  Supply  Company  owed  the  Chain  Tread  Company 
for  chains.  It  paid  the  bill  by  a  voucher  check  "in  full  settle- 
ment." The  check  contained  a  statement  that  credit  was  claimed 
for  certain  chains,  and  a  further  statement  that  if  the  items  were 
incorrect,  the  check  should  be  returned  with  explanation  by  return 
mail.  The  Auto  Supply  Company  was  not  entitled  to  the  amount 
it  deducted  from  the  bill,  and  in  a  suit  by  the  Chain  Tread  Com- 
pany for  the  balance  due,  the  question  arises  whether  the  plain- 
tiff, having  accepted  the  check,  can  sue  for  the  remainder. 

Held,  that  the  taking  of  a  check  will  not  prevent  collection 
of  the  remainder  of  the  amount  due,  when  there  is  no  considera- 
tion for  any  release. 

Loring,  J. 

In  Day  v.  McLea,  22  Q.B.D.  610,  it  was  decided  by  the  Court  of 
Appeal  in  England  that  a  creditor  who  cashes  a  check  sent  in  full 
settlement  is  not  barred  from  contending  that  he  did  not  agree 
to  take  it  on  the  terms  on  which  it  was  sent  if  at  the  time  he  accepts 
it  he  says  that  he  takes  it  on  account. 

But  the  true  rule  is  to  the  contrary.  The  true  rule  is  put 
with  accuracy  in  Nassoiy  v.  Tomliiison,  148  N.Y.  326,  in  these  words: 
"The  plaintiff  could  only  accept  the  money  as  it  was  offered,  which 
was  in  satisfaction  of  his  demand.  He  could  not  accept  the  benefit 
and  reject  the  condition,  for  if  he  accepted  at  all,  it  was  cion  oncrc. 
When  he  indorsed  and  collected  the  check,  referred  to  in  the  letter 
asking  him  to  sign  the  enclosed  receipt  in  full,  it  was  the  same,  in 
legal  effect,  as  if  he  had  signed  and  returned  the  receipt,  because 
acceptance  of  the  check  was  a  conclusive  election  to  be  bound  by  the 
condition  upon  which  the  check  was  offered." 

But  in  cases  (like  the  case  at  bar)  where  there  is  a  dispute  as 
to  the  amount  due  under  a  contract  and  payment  of  an  amount  which 


FORMATIOX    OF    CONTRACTS  6/ 

he  (the  debtor)  admits  to  be  due  (that  is  to  say,  as  to  which  there 
is  no  dispute)  is  made  by  the  debtor  in  discharge  of  the  whole  con- 
tract,  further  and  other  questions  arise. 

The  question  whether  the  creditor  who  under  these  circumstances 
accepts  such  a  payment,  protesting  that  he  takes  it  on  account,  is 
or  is  not  barred,  is  a  question  upon  which  again  the  authorities  are 
in  conflict. 

The  decision  in  most  of  these  cases  was  made  to  turn  upon  the 
question  whether  payment  of  the  amount  admitted  to  be  due  without 
dispute  did  or  did  not  constitute  a  valid  consideration  for  the  dis- 
charge of  the  balance  of  the  debt  about  which  there  was  a  dispute. 

In  the  case  at  bar  there  was  no  express  agreement  by  the 
creditor  to  forego  the  balance  of  his  claim  on  receiving  payment 
of  the  amount  admitted  without  dispute  to  be  due.  The  only  way  in 
which  such  an  agreement  can  be  made  out  in  the  case  at  bar  is 
on  the  ground  that  the  plaintiff  had  to  take  the  check  sent  him 
on  the  condition  on  which  it  was  sent,  and  that  by  cashing  the  check 
he  elected  to  accept  the  condition  and  so  took  the  part  admittedly  due 
in  full  discharge  of  the  whole  debt.  But  while  the  doctrine  of  elec- 
tion is  sound  where  a  check  is  sent  in  full  discharge  of  a  claim  no 
part  of  which  is  admitted  to  be  due,  it  does  not  obtain  where  a 
debtor  undertakes  to  make  payment  of  what  he  admits  to  be  due 
conditioned  on  its  being  accepted  in  discharge  of  what  is  in  dis- 
pute. Such  a  condition,  under  those  circumstances,  is  one  which  the 
debtor  has  no  right  to  impose,  and  for  that  reason  is  void.  In  such 
a  case  the  creditor  is  not  put  to  an  election  to  refuse  the  payment 
or  to  take  it  on  the  condition  on  which  it  is  offered.  He  can  take  the 
payment  admittedly  due  free  of  the  void  condition  which  the  debtor 
has  sought  to  impose.  Take  an  example :  Suppose  the  defendant 
had  agreed  to  deliver  to  the  plaintiff  a  stipulated  quantity  of  iron 
for  a  stipulated  price  during  each  month  of  the  year,  and  after  six 
months  the  market  price  of  iron  was  double  that  stipulated  for  in 
the  contract.  Suppose  further  that  the  defendant  on  the  seventh 
month  sent  the  stipulated  amount  of  iron  but  on  condition  that  the 
plaintiff  should  pay  double  the  stipulated  price,  can  there  be  any  doubt 
of  the  plaintiff's  right  to  retain  the  iron  without  paying  the  double 
price  ?  That  is  to  say,  can  there  be  any  doubt  that  the  condition 
which  required  the  plaintiff  to  pay  double  the  contract  price  for 
the  instalment  sent  was  void  and  that  the  plaintiff  under  those 
circumstances  is  not  put  to  an  election  but  can  keep  the  iron  under 
the  contract  ?  There  can  be  no  doubt  on  that  question  in  our  opinion ; 
and  in  our  opinion  the  principle  of  law  governing  that  case  governs 
the  case  at  bar,  where  the  debtor  undertook  without  right  to 
impose  upon  a  payment  of  what  admittedly  was  due  a  void  condition 
that  it  be  received  in  full  discharge  of  what  was  in  dispute. 

It  follows  that  in  accepting  the  check  in  the  case  at  bar  as  a 
payment  on  account,  the  plaintiff  was  within  its  rights  and  that  it 
has  not  agreed  to  accept  it  in  full  settlement  of  the  balance  of  the 
account. 


68  COMMERCIAL    LAW    CASES 

9.  Part  Payment  Accompanied  by  Other  Benefit  or  Detri- 

ment. 

Roberts  v.  Banse.  y8  N.  J.  L.  ^y. 

Roberts  sued  Banse  for  slander,  and  recovered  a  judgment 
of  $75  against  him.  He  afterwards  took  $20  in  full  satis- 
faction, thereby  causing  Banse  to  drop  an  appeal  which  he  con- 
templated taking.     He  now  sues  for  the  remainder. 

Held,  that  receipt  of  a  smaller  sum  in  consideration  of  the  re- 
lease of  a  larger  debt  is  good  consideration  if  accompanied  by 
some  other  detriment. 

Garrison,  J. 

There  would  be  no  question  as  to  the  defendant's  right  to  have 
this  judgment  canceled  were  it  not  for  the  legal  rule,  that  the  pay- 
ment of  a  less  sum  in  satisfaction  of  a  larger  one  is  no  satisfaction. 
This  rule,  however,  "has  been  constantly  departed  from  upon  slight 
distinctions"  as  is  generally  the  case  with  a  technical  rule  that  is  not, 
on  the  whole,  conducive  to  sound  morals. 

To  many  other  grounds  of  departure  that  have  been  recognized 
there  should  be  added:  that  if  the  debtor,  in  addition  to  the  payment 
of  a  part  of  the  debt  as  an  agreed  satisfaction  of  the  whole,  does 
at  the  request  of  his  creditor  some  substantial  thing  of  detriment 
to  his  interests,  that  he  was  not  bound  to  do,  upon  the  mutual  under- 
standing that  it  was  an  additional  consideration  for  the  creditor's 
promise  to  accept  the  less  for  the  larger  sum,  legal  effect  may  be 
given  to  such  compact  of  the  parties  if  the  debtor  has  fully  performed 
his  part  thereof  to  his  detriment.  Both  on  the  ground  of  a  new 
consideration  and  on  that  of  estoppel,  an  agreement  thus  made  and 
performed  should  obtain  legal  consideration. 

10.  Compromise  of  Amount  Due. 

Donohuc  V.  Woodbury.  6  CiisJi.  (Mass.)  148. 

Donohue  had  a  claim  against  Woodbury  for  labor.  There  was 
a  dispute  as  to  the  amount  owing,  and  Woodbury  offered  $35 
to  the  attorney  for  the  plaintiff,  which  was  accepted  without 
comment.  The  action  is  brought  to  recover  the  balance  claimed 
by  Donohue. 

Held,  that  a  compromise  of  an  unliquidated  amount  du°  con- 
stitutes valid  consideration. 

Shmv,  C.J. 

The  rule  is  well  settled,  that  the  i)ayment  of  a  part  of  a  debt, 
though  offered  in  satisfaction,   is  not  a  payment  of  the  whole,  and 


FORMATIOX    OF    CONTRACTS  69 

is  no  defense  to  an  action  for  the  balance.  But  that  rule  applies 
strictly  to  a  case  of  debt,  or  a  claim  for  a  liquidated  amount.  It 
does  not  apply  to  an  unliquidated  claim  for  damages.  Originally, 
the  present  was  a  claim  for  services,  and  was  for  unliquidated  dam- 
ages. Some  services  were  admitted  to  have  been  rendered,  but  the 
.  amount  was  denied ;  and  an  offer  was  made  of  a  less  sum  than  that 
claimed.  The  case  was  open  to  two  inquiries,  first,  as  to  the  time 
of  service,  and  second,  as  to  the  rate.  The  offer  therefore  of  $35 
was  both  to  liquidate  the  claim  and  pay  that  sum  in  satisfaction;  the 
acceptance  of  the  offer  fixed  and  liquidated  the  sum,  and  discharged  it. 

II.     Compositions  with  Creditors. 

li'liite  V.  Kimta.  107  N.  Y.  jiS. 

J.  and  L.  F.  Kuntz  made  an  assignment  for  the  benefit  of 
their  creditors.  White,  the  plaintiff,  a  creditor  to  the  extent  of 
about  $18,000,  received  notes  indorsed  by  the  assignee  to  the 
amount  of  about  $6,000,  pursuant  to  a  composition  agreement 
assented  to  by  White  in  consideration  of  a  secret  collateral  agree- 
ment for  the  repurchase  of  these  notes  by  the  assignee  for  $10,000. 
White  now  sues  on  that  agreement. 

Held^  that  in  a  composition  with  creditors,  an  agreement  where- 
by one  creditor  receives  more  than  the  others,  is  void. 

Earl,  J. 

It  is  a  general  rule  of  law  that  the  acceptance  of  a  lesser  sum, 
or  an  agreement  to  accept  it,  does  not  bar  a  demand  for  a  greater 
sum.  There  is  an  exception  to  this  general  rule,  however,  in  the 
case  of  a  composition  by  a  debtor  with  his  creditors,  in  which  they 
agree  to  accept  less  than  their  entire  demands.  Such  an  agreement, 
if  entered  into  by  a  debtor  with  a  number  of  his  creditors,  each  acting 
on  the  faith  of  the  engagement  of  the  others,  will  be  binding  upon 
them,  for  each  in  that  case  has  the  undertaking  of  the  rest  as  a 
consideration  for  his  own  undertaking.  "Where  creditors  thus  mutu- 
ally agree  with  each  other,  the  beneficial  consideration  to  each  creditor 
is  the  engagement  of  the  rest  to  forbear.  A  fund  is  thereby  secured 
for  the  general  advantage  of  all;  and  if  any  one  of  the  parties  were 
allowed  afterwards  to  enforce  his  own  claim,  it  would  operate  to  the 
detriment  of  the  other  creditors  who  have  relied  upon  his  agreement 
to  forbear,  and  might  even  deprive  them  of  the  sum  it  was  mutually 
agreed  they  should  receive  by  putting  it  out  of  the  power  of  the 
debtor  to  carry  out  the  composition."  "Every  composition  deed  is 
in  its  spirit,  if  not  in  its  terms,  an  agreement  between  the  creditors 
themselves,  as  well  as  between  them  and  the  debtor.  It  is  an  agree- 
ment that  each  shall  receive  the  sum  or  the  security  which  the  deed 
stipulates  to  be  paid  and  given,  and  nothing  more ;  and  that,  upon 
this  consideration,  the  debtor  shall   be  wholly  discharged   from  all 


70  COMMERCIAL    LAW    CASES 

the  debts  then  owing  to  the  creditors  who  sign  the  deed."  It  is, 
therefore,  held  that  every  agreement  made  by  one  creditor  for  some 
advantage  to  himself  over  other  creditors  who  unite  with  him  in  a 
composition  of  their  debts,  is  fraudulent  and  void.  So  scrupulous 
are  courts  in  compelling  creditors  to  the  observance  of  good  faith 
toward  one  another  in  cases  of  this  kind,  that  any  security  taken 
for  an  amount  beyond  the  composition  agreed  upon,  or  even  for 
that  sum,  better  than  that  which  is  common  to  all,  if  unknown  at 
the  time  to  the  other  creditors,  is  void  and  inoperative ;  and  no 
contract  to  pay  money  or  do  any  other  valuable  thing,  and  no  security, 
given  upon  any  such  promise,  whereby  a  creditor  obtains  an  advan- 
tage peculiar  to  himself,  can  be  enforced. 

12.    Doing  What  One  is  Bound  to  Do. 

Pool  V.  The  City  of  Boston.  5  Cush.  (Mass.)  2ig. 

Pool,  a  watchman  of  the  city  of  Boston,  while  in  the  discharge 
of  his  duty  as  such,  discovered  a  person  setting  fire  to  a  building 
and  secured  his  conviction.  He  claims  a  reward  offered  by  the 
city  government  for  the  detection  and  conviction  of  any  incen- 
diary. 

Held,  that  a  person  is  not  entitled  to  a  special  rfeward  for  acts 
done  in  accordance  with  his  duty. 

Wilde,  J. 

The  defense  to  this  action  is,  that  the  plaintiff  has  done  no  more 
than  it  was  his  duty  as  a  watchman  to  do,  and  that  a  promise  of  a 
reward  to  a  man  for  doing  his  duty  is  illegal,  or  void  for  want  of 
consideration.  The  same  principle  has  been  applied  to  promises  made 
to  persons  not  public  officers. 

So  it  has  been  decided  that  a  promise  of  extra  compensation 
to  a  witness,  in  case  he  would  attend  court  and  give  testimony,  at 
considerable  expense  and  inconvenience  to  himself,  was  void,  and 
that  he  could  only  recover  his  fees  allowed  by  law,  he  having  done 
no  more  than  he  was  duty  bound  to  do. 

These  decisions,  and  the  ])rinciples  on  which  they  are  founded, 
are  decisive  against  the  plaintiffs  claim  in  the  present  case;  it  was 
his  duty,  when  on  the  watch  he  discovered  Hollihan  setting  fire 
to  the  outhouse,  to  make  complaint  and  cause  him  to  be  arrested, 
or  to  give  notice  to  the  mayor,  or  some  other  city  officer,  that  they 
might  prosecute  him.  He  preferred  himself  to  prosecute  rather 
than  to  give  notice  to  the  city  authorities;  doubtless  with  the  hope 
of  entitling  himself  thereby  to  the  large  reward  oiTered.  But  this 
will  not  help  him.  The  i)rincii)al  object  of  the  reward  offered  was 
to  obtain  the  detection  of  the  offender;  the  conviction  was  required 
to  ascertain  who  was  the  oft'endcr.  But  to  entitle  the  plaintiff  to 
the    reward,   he   must   show   that    he    is   so   entitled,   as   well    for   the 


FORMATION    OF    CONTRACTS  7I 

detection  as  for  the  conviction  of  the  offender.  The  reward  cannot 
be  apportioned.  But  the  plaintiff  is  not  entitled  thereto  for  either 
service.  He  discovered  the  offender  while  he  was  on  duty  as  a  watch- 
man, and  was  bound  to  give  notice,  or  to  cause  him  to  be  arrested;  and 
he  preferred  the  latter  course,  but  he  could  not  thereby  subject  the 
defendants  to  a  liability  to  which  they  would  not  be  subject  if  he 
had  given  notice  to  some  one  of  the  city  officers. 

13.     Promise  of  Additional  Compensation.    (General  Rule.) 

Parrot  v.  Mexican  Central  Railway  Co.  20J  Mass.  184. 

The  plaintiffs  sue  to  recover  unexpected  expenses  incurred  by 
them  in  the  production  of  a  book  called  "The  Sportsman's  Guide 
Book  of  Mexico."  The  terms  for  the  publication  of  the  book 
were  contained  in  a  written  contract  made  by  the  defendant  rail- 
road, but  subsequently  the  representatives  of  the  road  orally  agreed 
to  pay  an  additional  sum  towards  expenses.  It  is  this  sum  that 
the  plaintiffs  seek  to  recover. 

Held,  that  upon  the  facts  of  the  case,  there  was  no  consideration 
for  the  subsequent  agreement. 

Knowlton,  C.  J. 

The  defendant  contends  that  there  was  no  consideration  for 
the  promise  to  pay  money  to  the  plaintiff's,  because  they  were  already 
bound  by  the  writing  to  do  all  that  they  undertook  to  do  under  the 
oral  agreement.  As  a  general  proposition,  it  is  settled  in  this  Com- 
monwealth that  a  promise  to  pay  one  for  doing  that  which  he  was 
under  a  prior  legal  duty  to  do  is  not  binding  for  want  of  a  valid 
consideration.  It  has  often  been  said  that  the  principle  involved  is 
the  same  that  lies  at  the  foundation  of  the  doctrine  that  a  promise 
to  accept  or  pay  a  less  sum  in  discharge  of  a  debt  for  a  greater 
amount  is  not  binding. 

A  limitation  of  the  general  proposition  has  been  established  in 
Massachusetts  in  cases  where  a  plaintiff,  having  entered  into  a  con- 
tract with  the  defendant  to  do  certain  work,  refuses  to  proceed  with 
it,  and  the  defendant,  in  order  to  secure  to  himself  the  actual  per- 
formance of  the  work  in  place  of  a  right  to  collect  damages  from 
the  plaintiff,  promises  to  pay  him  an  additional  sum.  This  limitation 
is  not  intended  to  affect  the  rule  that  a  contract  cannot  be  binding 
without  a  consideration ;  but  it  rests  upon  the  doctrine  that,  under 
these  circumstances,  there  is  a  new  consideration  for  the  promise.  In 
Rollins  V.  Marsh,  128  Mass.  116,  the  court  said:  "The  parties  had 
made  a  contract  in  writing  with  which  the  plaintiff  had  become  dis- 
satisfied, and  which  she  had  informed  the  defendant  that  she  would 
not  fulfill  unless  the  terms  were  modified.  If  she  had  abandoned  her 
contract,  he  might  have  made  a  new  arrangement  with  some  one  else 
for  the  support  of  his  ward,  and  enforced  whatever  remedy  he  had 


^2  COMMERCIAL    LAW    CASES 

for  the  breach  against  the  plaintiff.  Instead  of  this,  he  made  a  new 
contract  with  her,  which  operated  as  a  rescission  of  the  original  agree- 
ment." In  such  a  case,  the  new  promise  is  given  to  secure  the  per- 
formance, in  place  of  an  action  for  damages  for  not  performing,  as 
was  pointed  out  by  this  court. 

This  limitation  in  the  application  of  the  general  rule  to  such 
facts  is  not  recognized  in  England,  nor  in  most  of  the  states  in  this 
country.  While  it  is  well  established  in  Massachusetts,  the  doctrine 
should  not  be  extended  beyond  the  cases  to  which  it  is  applicable  upon 
the  recognized  reasons  that  have  been  given  for  it.  A  majority 
of  the  court  are  of  the  opinion  that  it  is  not  applicable  to  the  evi- 
dence in  this  case,  and  that  the  defendant  is  right  in  its  contention 
that,  upon  the  assumption  that  the  parties  were  bound  by  the  written 
contract,  there  was  no  consideration  for  the  new  promise  of  the 
defendant. 

14.     Promise  of  Additional  Compensation.   (Conflicting  Rule.) 

Moore  v.  Detroit  Locomotive  Works.  14  Mich.  266. 

The  Detroit  Locomotive  Works  failed  to  fulfill  an  agreement 
to  manufacture  and  deliver  a  locomotive  to  Moore,  Smith  &  Com- 
pany within  a  specified  time.  Three  or  four  months  later  deliv- 
ery was  ofifered  and  accepted  upon  a  new  agreement  whereby 
Moore,  Smith  &  Company  waived  all  claim  for  damages  for  non- 
delivery. The  Detroit  Locomotive  Works  now  sues  for  the  price, 
and  Moore,  Smith  &  Company  seek  to  recoup  damages  for  non- 
delivery. 

Held,  that  the  delivery  was  sufficient  consideration  to  support 
the  agreement  for  waiver. 

Coolcy,  J. 

There  are  several  cases  which  hold  that  where  a  party  abandons 
a  contract,  and  the  other  party  promises  that  if  he  will  go  on  and 
complete  it,  a  further  compensation  shall  be  made  beyond  what  was 
originally  agreed,  such  promise  is  based  upon  sufficient  consideration, 
and  may  be  enforced.  In  Munroe  v.  Perkins,  9  Pick.  298,  the 
plaintiff  had  agreed  by  deed  to  erect  a  building  for  defendants. 
Finding  his  contract  a  losing  one,  he  had  concluded  to  abandon  it, 
but  resumed  work  on  the  oral  promise  of  the  defendants  that,  if  he 
would  do  so,  they  would  pay  him  what  the  work  was  worth,  without 
regard  to  the  contract.  The  court  say  that  whether  the  parol  promise 
was  without  consideration  "depends  entirely  on  the  question  whether 
the  first  contract  was  waived.  The  plaintiff  having  refused  to  perform 
that  contract,  as  he  might  do,  subjecting  himself  to  such  damages  as 
the  other  parties  might  show  they  were  entitled  to  recover,  he  after- 
wards went  on,  on  the  faith  of  the  new  promise,  and  finished  the 
work.     This  was  a  sufficient  consideration.     If  defendants  were  will- 


FORMATION    OF    CONTRACTS  73 

ing  to  accept  his  relinquishment  of  the  old  contract,  and  proceed  on 
a  new  agreement,  the  law,  we  think,  would  not  prevent  it." 

In  Lattimore  v.  Harsen,  14  Johns.  330,  the  plaintiffs  had  en- 
tered into  an  agreement  under  seal  to  perform  certain  work  under 
a  penalty,  and  were  afterwards  released  by  defendant  by  parol  from 
a  further  performance  under  the  agreement,  he  promising  them  that 
if  they  would  go  on  and  complete  the  work,  he  would  pay  them  for 
their  labor  by  the  day.  The  court  held,  that  as  the  plaintiffs  might 
have  released  themselves  from  the  agreement  by  incurring  the  penalty, 
there  was  a  sufficient  consideration  for  the  promise  of  the  defendant, 
and  that  the  plaintiffs  might  recover  under  the  substitute  agreement. 

In  Lawrence  v.  Davey,  28  Vt.  264,  there  was  a  contract  to  deliver 
coal  at  specified  times  and  rates.  A  portion  of  it  was  delivered,  and 
plaintiff  then  informed  defendant  that  he  could  not  deliver  at  those 
rates,  and  if  the  latter  intended  to  take  advantage  of  it,  he  should 
not  deliver  any  more;  and  that  he  should  deliver  no  more  unless  the 
defendant  would  pay  for  the  coal  independently  of  the  contract.  The 
defendant  agreed  to  do  so,  and  the  coal  was  delivered.  On  suit  being 
brought  for  the  price,  the  court  say :  "Although  the  promise  to 
waive  the  contract  was  after  some  portion  of  the  coal  sought  to  be 
recovered  for  had  been  delivered,  and  so  delivered  that  probably 
the  plaintiff,  if  defendant  had  insisted  upon  strict  performance  of  the 
contract,  could  not  have  recovered  anything  for  it,  yet  nevertheless, 
the  agreement  to  waive  the  contract,  and  the  promise,  and  above  all, 
the  delivery  of  coal  after  this  agreement  to  waive  the  contract,  and 
upon  the  faith  of  it,  will  be  a  sufficient  consideration  to  bind  the 
defendant  to  pay  for  the  coal  already  received." 

Each  of  these  cases  is  to  the  point  now  in  issue  before  us.  It 
is  true  that  in  each  the  abandonment  of  the  contract  by  the  plaintiff 
was  before  very  much  had  been  done  under  it,  and  on  the  claim  that 
the  bargain  was  a  hard  one  upon  him.  But  neither  of  these  circum- 
stances can  distinguish  the  cases  from  the  present.  An  unprofitable 
contract  is  not,  by  that  circumstance,  made  any  the  less  binding  on  the 
promisor ;  and  the  promisee  has  the  same  right  and  the  same  power 
to  discharge  a  contract  in  consideration  of  a  new  promise,  after 
breach  as  before.  A  different  case  would  be  presented  if  the  plaintiffs 
had  relied  upon  an  agreement  to  waive  the  damages  made  after 
delivery;  for  in  that  case  nothing  would  have  remained  for  them  to  do 
or  to  promise  which  could  be  a  consideration  for  the  waiver.  But 
here,  although  they  had  done  the  work  which  enabled  them  to  de- 
liver the  engine,  they  refused  altogether,  according  to  their  statement, 
to  go  further,  except  under  the  substituted  agreement;  so  that  the 
plaintiffs  in  error  actually  received  the  property  under  the  promise 
which  they  now  insist  is  invalid.  If  they  regarded  it  for  their  in- 
terest at  the  time  to  make  the  arrangement,  and  have  obtained  the 
property  under  it,  it  is  not  in  our  power  now  to  set  it  aside  on  the 
ground  of  their  being  entitled  to  just  as  much  under  the  contract 
before  existing.  They  knew  their  legal  rights  at  the  time,  and  must 
be  supposed  to  have  consulted  their  own  interests  in  entering  into 
the  new  arrangement. 


74  COMMERCIAL   LAW    CASES 

15.     Additional  Promise  by  Third  Party. 

DeCicco  V.  Schweizer.  221  N.  Y.  4J1. 

Schweizer  executed  a  contract  whereby  he  agreed  to  pay  $2,500 
a  year  as  a  marriage  settlement  to  his  daughter,  then  engaged  to 
Count  GuHnelh.  After  ten  years,  he  refused  to  make  further 
payments  under  the  agreement,  and  the  plaintiff,  an  assignee  of 
the  contract,  sues  for  payments  due. 

Held,  that  a  promise  by  one  person  to  pay  a  certain  sum  for 
the  performance  of  a  contract  between  third  parties,  rests  upon 
a  valid  consideration. 

Cardoao,  J, 

That  marriage  may  be  a  sufficient  consideration  is  not  disputed. 
The  argument  for  the  defendant  is,  however,  that  Count  Gulinelli 
was  already  affianced  to  Miss  Schweizer,  and  that  the  marriage  was 
merely  the  fulfilment  of  an  existing  legal  duty.  For  this  reason,  it 
is  insisted,  consideration  was  lacking.  The  argument  leads  us  to 
the  discussion  of  a  vexed  problem  of  the  law  which  has  been  debated 
by  courts  and  writers  with  much  subtlety  of  reasoning  and  little 
harmony  of  results.  There  is  a  general  acceptance  of  the  proposition 
that  where  A  is  under  a  contract  with  B,  a  promise  made  by  one  to 
another  to  induce  performance  is  void.  The  trouble  comes  when 
the  promise  to  induce  performance  is  made  by  C,  a  stranger.  Dis- 
tinctions are  then  drawn  between  bilateral  and  unilateral  contracts ; 
between  a  promise  by  C  in  return  for  a  new  promise  by  A,  and  a 
promise  by  C  in  return  for  performance  by  A.  Some  jurists  hold 
that  there  is  consideration  in  both  classes  of  cases.  Others  hold  that 
there  is  consideration  where  the  promise  is  made  for  a  new  promise, 
but  not  where  it  is  made  for  performance.  Others  hold  that  there  is 
no  consideration  in  either  class  of  cases. 

The  courts  of  this  state  are  committed  to  the  view  that  a  promise 
by  A  to  B  to  induce  him  not  to  break  his  contract  with  C  is  void. 
If  that  is  the  true  nature  of  this  promise,  there  was  no  consideration. 
We  have  never  held,  however,  that  a  like  infirmity  attaches  to  a 
promise  by  A,  not  merely  to  B,  but  to  B  and  C  jointly,  to  induce 
them  not  to  rescind  or  modify  a  contract  which  they  are  free  to  aban- 
don. To  determine  whether  that  is  in  substance  the  promise  before 
us,  there  is  need  of  closer  analysis. 

The  defendant's  contract,  if  it  be  one,  is  not  bilateral,  it  is  uni- 
lateral. 

The  situation  is  the  same  in  substance  as  if  the  promise  had  run 
to  husband  and  wife  alike,  and  had  been  intended  to  induce  per- 
formance by  both.  They  were  free  by  common  consent  to  terminate 
their  engagement  or  to  postpone  the  marriage.  If  they  forebore 
from  exercising  that  right  and  assumed  the  responsibilities  of  mar- 
riage in  reliance  on  the  defendant's  promise,  he  may  not  now  retract 


FORMATION    OF    CONTRACTS  75 

it.  The  distinction  between  a  promise  by  A  to  B  to  induce  him  not 
to  break  his  contract  with  C,  and  a  Hke  promise  to  induce  him  not  to 
join  with  C  in  a  vokmtary  rescission,  is  not  a  new  one.  It  has  been 
suggested  in  cases  where  the  new  promise  ran  to  B  solely,  and  not 
to  B  and  C  jointly.  The  criticism  has  been  made  that  in  such  cir- 
cumstances there  ought  to  be  some  evidence  that  C  was  ready  to 
withdraw.  Whether  that  is  true  of  contracts  to  marry  is  not  certain. 
It  does  not  seem  a  far-fetched  assumption  in  such  cases  that  one  will 
release  where  the  other  has  repented.  We  shall  assume,  however, 
that  the  criticism  is  valid  where  the  promise  is  intended  as  an  induce- 
ment to  only  one  of  the  two  parties  to  the  contract.  It  may  then  be 
sheer  speculation  to  say  that  the  other  party  could  have  been  per- 
suaded to  rescind.  But  where  the  promise  is  held  out  as  an  induce- 
ment to  both  parties  alike,  there  are  new  and  different  implications. 
One  does  not  commonly  apply  pressure  to  coerce  the  will  and  action 
of  those  who  are  anxious  to  proceed.  The  attempt  to  sway  their 
conduct  by  new  inducements  is  an  implied  admission  that  both  may 
waver ;  that  one  equally  with  the  other  must  be  strengthened  and 
persuaded;  and  that  rescission  or  at  least  delay  is  something  to  be 
averted,  and  something,  therefore,  within  the  range  of  not  unreason- 
able expectation.  If  pressure,  applied  to  both,  and  holding  both  to 
their  course,  is  not  the  purpose  of  the  promise,  it  is  at  least  the  natural 
tendency  and  the  probable  result. 

The  defendant  knew  that  a  man  and  a  woman  were  assuming 
the  responsibilities  of  wedlock  in  the  belief  that  adequate  provision 
had  been  made  for  the  woman  and  for  future  offspring.  He  offered 
this  inducement  to  both  while  they  were  free  to  retract  or  to  delay. 
That  they  neither  retracted  nor  delayed  is  certain.  It  is  not  to  be 
expected  that  they  should  lay  bare  all  the  motives  and  promptings, 
some  avowed  and  conscious,  others  perhaps  half-conscious  and  inar- 
ticulate, which  swayed  their  conduct. 

Undoubtedly,  the  prospective  marriage  is  not  to  be  deemed  a  con- 
sideration for  the  promise  "unless  the  parties  have  dealt  with  it  on 
that  footing."  But  here  the  very  formality  of  the  agreement  suggests 
a  purpose  to  affect  the  legal  relations  of  the  signers.  That  the 
parties  believed  there  was  a  consideration  is  certain.  The  document 
recites  the  engagement  and  the  coming  marriage.  It  states  that  these 
were  the  "consideration"  for  the  promise.  In  these  circumstances  we 
cannot  say  that  the  promise  was  not  intended  to  control  the  conduct 
of  those  whom  it  was  designed  to  benefit. 


1 6.    Conditional  Consideration. 

Higbie  v.  Rust.  211  111.  jjj. 

Rust  agreed  to  sell  Higbie  all  the  five-pound  jelly  pails  he  might 
want  at  40c  per  dozen,  f.  o.  b.  Keene,  N.  H.  Rust  subsequently 
advanced  the  price  and  refused  to  fill  orders  for  Higbie  as  agreed. 


76  COMMERCIAL   LAW    CASES 

Higbie  claims  that  Rust  was  obliged  to  furnish  him  with  all  the 
pails  he  might  want  for  his  trade. 

Held,  that  an  agreement  to  sell  all  the  goods  of  a  particular 
description  that  a  party  may  want  or  order  is  without  consideration. 

Scott,  J. 

It  will  be  observed  that  both  by  the  conversation  at  Keene  and 
the  letter  relied  upon,  Rust  stated  that  he  would  furnish  all  the 
pails  that  Higbie  "wanted."  If  it  be  conceded  that  the  latter  accepted 
this  proposition,  we  think  the  contract  cannot  be  enforced,  for  the 
reason  that  it  is  lacking  in  mutuality.  By  its  terms  Rust  would  be 
obliged  to  sell,  but  Higbie  would  not  be  obliged  to  buy.  The  fact 
that  Higbie  was  an  extensive  dealer  in  pails,  supplying  many  custo- 
mers, does  not  alter  the  situation.  He  might  elect  to  sell  no  five- 
pound  pails  whatever,  or  to  purchase  all  he  should  sell  from  some 
person  other  than  Rust.  There  was  no  agreement  on  Higbie's  part 
to  take  or  want  such  pails  as  he  might  sell  to  his  trade,  or  to  take 
or  want  any  pails  whatever. 

Where  there  is  no  consideration  for  the  promise  of  one  party 
to  furnish  or  sell  so  much  of  the  commodity  as  the  other  may  want, 
except  the  promise  of  the  other  to  take  and  pay  for  so  much  of  the 
commodity  as  he  may  want,  and  there  is  no  agreement  that  he  shall 
want  any  quantity  whatever,  and  no  method  exists  by  which  it  can  be 
determined,  whether  he  will  want  any  of  the  commodity,  or,  what 
quantity  he  will  want,  the  contract  is  void  for  lack  of  mutuality. 

Plaintiff  in  error  regards  the  case,  National  Furnace  Co.  v. 
Keystone  Manufacturing  Co.,  no  111.  427,  as  supporting  his  position. 
In  that  case,  the  Keystone  Manufacturing  Company  was  engaged  in 
a  large  manufacturing  business,  necessarily  using  a  large  quantity 
of  iron  in  the  transaction  of  its  affairs,  and  contracted  for  all  the 
iron,  at  a  fixed  price,  which  it  would  need  in  its  business  during 
the  ensuing  year,  and  the  National  Furnace  Company  agreed  to 
furnish  the  same  at  that  price.  In  that  case,  there  was  something  by 
which  to  measure  the  needs  of  the  purchaser  and  fix  the  amount  of 
the  commodity  to  be  delivered  under  the  contract,  viz.,  such  quantity 
as  should  be  needed  during  the  year  in  the  manufacturing  business 
which  the  purchaser  was  then  conducting  and  in  which  it  was  certain 
some  quantity  would  be  needed.  Here  there  is  no  method  to  de- 
termine what  quantity,  if  any,  the  purchaser  would  want,  as  his 
wants  would  be  measured  by  his  sales  and  so  far  as  Rust  was  con- 
cerned, would  only  exist  if  he,  Higbie,  was  unable  to  purchase  else- 
where at  a  better  price. 

17.     Past  Consideration. 

Roscorla  V.  Thomas,  j  Q.  B.  (Eng.)  2^4. 

Roscorla  bought  a  horse  from  Thomas  without  any  warranty. 
Thomas  subsef|uently  warranted  the  horse,  and  Roscorla  now  sues 
on  tlie  warranty. 


FORMATION    OF    CONTRACTS  yj 

Held,  that  the  executed  consideration  for  the  sale  of  the  horse 
would  not  support  the  subsequent  promise. 

Lord  Denman,  C.  J. 

It  may  be  taken  as  a  general  rule,  subject  to  exceptions  not 
applicable  to  this  case,  that  the  promise  must  be  coextensive  with 
the  consideration.  In  the  present  case,  the  only  promise  that  would 
result  from  the  consideration,  as  stated,  and  be  coextensive  with  it, 
would  be  to  deliver  the  horse  upon  request.  The  precedent  sale, 
without  a  warranty,  though  at  the  request  of  the  defendant,  imposes 
no  other  duty  or  obligation  upon  him.  It  is  clear,  therefore,  that 
the  consideration  stated  would  not  raise  an  implied  promise  by  the 
defendant  that  the  horse  was  sound  or  free  from  vice. 

But  the  promise  in  the  present  case  must  be  taken  to  be,  as  in 
fact  it  was,  express :  and  the  question  is,  whether  that  fact  will 
warrant  the  extension  of  the  promise  beyond  that  which  would  be 
implied  by  law ;  and  whether  the  consideration,  though  insufficient 
to  raise  an  implied  promise,  will  nevertheless  support  an  express  one. 
And  we  think  that  it  will  not. 

i8.     Moral  Obligation  as  Past  Consideration. 

Freeman  v.  Robinson.  j8  N.  J.  L.  j^j. 

Robinson's  firm  sold  goods  to  Freeman's  minor  son,  without 
order  or  consent  of  Freeman,  w^ho,  nevertheless,  later  promised 
to  pay  the  bill.     They  now  sue  Freeman  for  the  amount. 

Held,  that  as  in  New  Jersey  the  duty  of  a  father  to  provide 
maintenance  for  his  son  is  a  mere  moral  obligation,  there  is  no 
consideration  to  support  the  promise  to  pay. 

Depue,  J. 

In  Hawkes  v.  Saunders,  Cowp.  290,  Lord  Mansfield  said  that, 
"where  a  man  is  under  a  moral  obligation,  which  no  court  of  equity 
or  law  can  enforce,  and  promises,  the  honesty  and  rectitude  of  the 
thing  is  a  consideration."  And  Justice  Buller  declared  the  true 
rule  to  be  that  "wherever  a  defendant  is  under  moral  obligation, 
or  is  liable  in  conscience  and  equity  to  pay,  that  is  sufficient  con- 
sideration." The  influence  of  these  great  names  induced  the  opinion, 
which  at  one  time  prevailed,  that  a  mere  moral  obligation,  under 
all  circumstances,  was  a  sufficient  consideration  for  an  express  prom- 
ise. Subsequent  examination  of  this  doctrine,  in  the  light  of  legal 
principles,  has  led  to  a  modification  of  this  opinion,  and  a  repudiation 
of  the  principle  in  its  generality  of  application. 

In  an  elaborate  note  to  Wennall  v.  Adney,  3  B.  &  P.  247,  it 
is  observed,  that  Lord  Mansfield  "used  the  term  moral  obligation 
not  as  expressive  of  any  vague  and  undefined  claim  arising  from  near- 
ness of   relationship,   but   of   those   imperative   duties   which   would 


yS  COMMERCIAL    LAW    CASES 

be  enforceable  by  law,  were  it  not  for  some  positive  rule,  which, 
with  a  view  to  general  benefit,  exempts  the  party  in  that  instance 
from  legal  liability."  The  justice  of  this  observation  is  apparent 
from  the  cases  stated  by  the  Chief  Justice  as  illustrations  of  the 
application  of  the  doctrine.  He  enumerates  promises  to  pay  debts, 
the  recovery  of  which  is  barred  by  the  statute  of  limitations;  a 
promise  by  a  man  after  he  becomes  of  age  to  pay  a  just  debt  con- 
tracted during  minority,  but  not  for  necessaries;  a  promise  by  a 
bankrupt  after  his  certificate  to  pay  his  debts  in  full;  and  a  promise 
to  perform  a  secret  trust,  or  a  trust  void  for  want  of  writing  by 
the  statute  of  frauds.  In  each  of  these  instances  there  was,  originally, 
a  consideration  of  benefit  to  the  promisor,  from  which  a  promise  would 
have  been  implied  capable  of  legal  enforcement,  if  some  statutory 
provision  or  positive  rule  of  law  had  not  debarred  the  party  from 
legal  remedy.  Indeed,  in  the  case  then  in  hand,  which  was  an  action 
on  a  promise  by  an  executrix,  into  whose  hands  assets  had  come, 
more  than  sufficient  to  pay  debts  and  legacies,  to  pay  the  plaintiff 
his  legacy,  the  defendant  had  received  a  consideration  with  respect 
to  which  a  remedy  might  have  been  had  by  action,  were  it  not  for 
a  technical  rule  of  law. 

In  the  note  referred  to,  the  conclusion  is  arrived  at  from  an 
examination  of  all  the  cases,  that  "an  express  promise  can  only  re- 
vive a  precedent  good  consideration  which  might  have  been  enforced 
at  law  through  the  medium  of  an  implied  promise,  had  it  not  been 
suspended  by  some  positive  rule  of  law,  but  can  give  no  original  right 
of  action,  if  the  obligation  on  which  it  is  founded  never  could  have 
been  enforced  at  law,  though  not  barred  by  any  legal  maxim  or 
statute  provision." 

It  may  now  be  considered  as  the  settled  law,  established  on  prin- 
ciple and  authority,  that  a  mere  moral  obligation  or  duty,  as  an 
executed  consideration,  is  not  a  sufficient  consideration  to  support  a 
subsequent  express  promise.  If  services  be  rendered  at  the  request 
of  the  promisor,  which  are  for  the  benefit  of  a  third  party  towards 
whom  the  promisor  owes  only  moral  duties,  they  may  be  recovered  for. 
In  such  cases,  the  precedent  request  and  services  rendered  in  com- 
pliance therewith  afford  a  consideration  from  which  a  promise  to 
pay  would  be  implied,  or  such  as  is  needed  to  uphold  an  express 
promise.  But  where  the  duty  is  one  of  moral  obligation  only,  and 
the  service  is  rendered  without  a  previous  request,  a  subsequent 
promise  to  pay  is  without  the  consideration  which  is  necessary  to 
the  validity  of  the  contract. 

19.    Past  Consideration  in  Case  of  Debt  Discharged  by  Law. 

Ilerrinfjton  7'.  Dozntf.  220  N.  V.  162. 

Davitt  made  a  note  to  the  plaintiff.  He  afterwards  went  into 
bankruptcy  and  effected  a  composition  with  his  creditors.  After 
that  composition  was  accepted  by  the  plaintiff,  Davitt  promised  her 
to  pay  the  debt. 


FORMATION    OF    CONTRACTS  79 

Held,  that  a  previous  obligation  will  support  a  subsequent 
promise  to  pay,  if  the  original  obligation  has  been  discharged  by 
a  rule  intended  for  the  debtor's  advantage. 

Collin,  J. 

The  debtor  does  not  promise  to  pay  the  debt  discharged  in 
bankruptcy,  unless  there  is  a  distinct  and  unequivocal  expression  by 
him,  by  a  writing  of  the  prescribed  form,  of  a  clear  intention  to 
bind  himself  to  its  payment.  The  acknowledgment  of  the  exist- 
ence of  the  debt  by  the  payment  of  a  part  of  it  or  interest  upon  it  or  by 
express  written  words  is  not  sufficient.  For  the  purpose  of  creating 
anew  the  liability,  the  law  does  not  imply  a  promise.  The  promise 
need  not  be  made  to  the  creditor,  but  it  must  with  certainty  refer  to 
the  debt.  No  particular  form  of  words  need  be  used.  The  promise  is 
constituted  by  words  which,  in  their  natural  import,  express  the 
present  intention  to  obligate  or  undertake  to  pay.  The  payment  may, 
however,  depend  upon  a  contingency  or  condition.  If  so  dependent, 
it  must  be  proved  that  the  contingency  has  happened  or  the  condi- 
tion has  been  performed.  A  promise  made  at  any  time  after  the 
adjudication,  and,  perhaps,  after  the  filing  of  the  petition,  is  actionable. 

The  letter  of  the  defendant's  testator  constituted  a  distinct  and 
unqualified  promise  to  pay  the  debt. 

The  rule  of  law  is  well-nigh  universal  that  such  a  promise  made 
has  an  obligating  and  validating  consideration  in  the  moral  obliga- 
tion of  the  debtor  to  pay.  The  debt  is  not  paid  by  the  discharge  in 
bankruptcy.  It  is  due  in  conscience,  although  discharged  in  law, 
and  this  moral  obligation,  uniting  with  the  subsequent  promise  to 
pay,  creates  a  right  of  action.  The  appellant  asserts  that  the  rule 
does  not  obtain  or  have  applicability  where,  as  in  the  present  case, 
there  was  a  composition  between  the  bankrupt  and  his  creditors,  as- 
sented to  and  accepted  by  the  creditors  seeking  to  enforce  the  unpaid 
debt.  The  clear  weight  of  judicial  opinion  and  correct  reasoning 
declare  such  assertion  erroneous.  In  Cohen  v.  Lachenmaier,  147 
Wis.  649,  the  Supreme  Court  of  Wisconsin  said:  "It  is  further 
contended  that  each  promise,  if  made,  is  nudum  pactum,  because 
the  plaintiff  as  one  of  the  creditors  joined  with  the  majority  of  the 
creditors  in  number  and  amount  in  accepting  the  defendant's  offer 
of  a  composition  with  the  creditors  in  settlement  of  their  claims. 
This  claim  is  based  upon  the  ground  that  a  discharge  in  bankruptcy 
in  a  composition  is  not  a  discharge  by  operation  of  law,  but  is  one 
effected  by  the  voluntary  assent  of  the  creditors.  The  adjudica- 
tions are  to  the  effect  that  a  debt  which  has  been  extinguished  by  a 
voluntary  agreement  of  the  debtor  and  creditor  will  not  support  a  new 
promise,  and  that  one  discharged  by  operation  of  law  will  support 
one.  The  proceeding  resulting  in  the  discharge  of  a  debtor  from 
liability,  based  on  a  composition  after  bankruptcy  proceedings  are 
instituted,  is  not  in  its  nature  such  a  voluntary  act  of  the  creditor  as 
is  considered  in  law  as  being  a  voluntary  assent  of  the  creditor  to 
the  satisfaction  of  the  debt." 


8o  COMMERCIAL   LAW    CASES 

The  adequate  consideration  was  the  moral  obHgation  to  keep 
the  original  promise;  this  rule  does  not  apply  to  a  composition  inter 
partes  which  derives  its  validity  merely  from  the  will  of  the  parties; 
and  if  a  debt  is  legally  discharged  by  the  voluntary  act  of  the  party, 
there  remains  no  obligation  which  can  be  deemed  a  consideration 
for  a  promise ;  a  discharge  by  performance  of  the  terms  of  a  bank- 
ruptcy composition,  is  a  discharge  by  operation  of  law;  the  composi- 
tion is  as  to  the  assenting  creditor  both  a  voluntary  act  and  an  act  of 
the  law,  but  its  efficiency  is  derived  from  the  compulsory  power  of 
the  law. 


20.     Consideration  Part  Past  and  Part  Present. 

Blackwell  v.  Kercheval.  27  Ida.  5^7- 

Blackwell  sold  certain  stock  for  Kistler,  and  without  authority 
took  in  payment  a  note  instead  of  cash.  Kistler  agreed  to  hold 
Blackwell  harmless  in  respect  of  this  unauthorized  act,  upon  Black- 
well's  agreement  to  continue  to  attempt  collection  of  the  amount 
due.  In  a  suit  by  Blackwell  against  Kistler's  administrator  to 
enforce  this  contract,  it  was  urged  in  defense  that  there  was  no 
consideration  for  the  agreement  to  hold  Blackwell  harmless. 

Held,  that  the  request  for  continuance  of  Blackwell's  efforts 
to  collect  would  support  a  promise  to  be  responsible  for  those  in 
the  past. 

Budge,  /. 

Where  there  is  a  request  to  continue  services  of  a  character 
theretofore  rendered,  the  continuance  of  such  services  is  a  sufficient 
consideration  to  support  a  promise  to  pay  for  those  rendered  prior 
to  such  request.  It  is  quite  certain  that  the  request  to  perform  the 
services,  coupled  with  the  promise  to  pay  for  them,  takes  the  case 
out  of  the  rule  that  no  action  will  lie  for  services  rendered  voluntarily 
or  performed  gratuitously,  and  that  the  same  facts  take  the  case  out  of 
the  rule  declaring  an  executed  consideration  to  be  insufficient  to 
support  a  promise.  Whatever  may  be  thought  of  the  reasoning  of 
some  of  the  earlier  English  cases,  it  cannot  be  denied  that  the  con- 
clusion that  where  there  is  a  request,  and  continuous  services  of 
value  are  rendered  to  the  person  making  the  request,  the  considera- 
tion is  a  valid  one,  and  will  support  a  promise  to  pay  for  such  serv- 
ices, although  some  of  them  were  rendered  prior  to  the  request. 

An  entire  promise  founded  partly  on  a  past  and  executed  con- 
sideration and  partly  on  an  executory  consideration,  is  supported  by 
the  executory  consideration. 

"A  consideration  which  is  executed  in  part  only  is  called  a  con- 
tinuing consideration  and  is  valid,  the  executory  portion  of  it  being 
sufficient  to  support  the  entire  promise." 


FORMATION    OF    CONTRACTS  8 1 

21.     Privity  to  Consideration.    (Majority  Rule.) 

Seaver  v.  Ransom.  2^4  N.  Y.  ^jj. 

Ransom  was  executor  of  the  estate  of  Beman,  who  had  prom- 
ised his  wife  when  she  was  about  to  die,  that  if  she  would  not 
change  her  will,  he  would  himself  leave  certain  property  to  Miss 
Seaver,  as  Mrs.  Beman  had  herself  intended  to  do.  This  Beman 
did  not  do,  and  Miss  Seaver  sues  on  the  agreement,  as  one  for 
whose  benefit  it  was  made.  (In  New  York,  by  statute,  husband 
and  wife  may  contract  together  except  in  regard  to  relieving  the 
husband  from  liability  to  support  the  wife.) 

Held,  that  the  person  for  whose  benefit  a  contract  is  made  may 
sue  upon  it  in  New  York. 

Pound,  J. 

Contracts  for  the  benefit  of  third  persons  have  been  the  prolific 
source  of  judicial  and  academic  discussion.  The  general  rule,  in 
both  law  and  equity,  was  that  privity  between  a  plaintiff  and  a  de- 
fendant is  necessary  to  the  maintenance  of  an  action  on  the  contract. 
The  consideration  must  be  furnished  by  the  party  to  whom  the  promise 
was  made.  The  contract  cannot  be  enforced  against  the  third 
party  and,  therefore,  it  cannot  be  enforced  by  him.  On  the  other 
hand,  the  right  of  the  beneficiary  to  sue  on  a  contract  made  expressly 
for  his  benefit,  has  been  fully  recognized  in  many  American  jurisdic- 
tions, either  by  judicial  decision  or  by  legislation,  and  it  is  said  to 
be  "the  prevailing  rule  in  this  country."  It  has  been  said  that  "the 
establishment  of  this  doctrine  has  been  gradual,  and  is  a  victory  of 
practical  utility  over  theory,  of  equity  over  technical  subtlety."  The 
reasons  for  this  view  are  that  it  is  just  and  practical  to  permit  the 
person  for  whose  benefit  the  contract  is  made  to  enforce  it  against 
one  whose  duty  it  is  to  pay.  Other  jurisdictions  still  adhere  to  the 
present  English  rule  that  a  contract  cannot  be  enforced  by  or  against 
a  person  who  is  not  a  party.  In  New  York  the  right  of  the  benefi- 
ciary to  sue  on  contracts  made  for  his  benefit  is  not  clearly  or  simply 
defined.  It  is  at  present  confined,  first,  to  cases  where  there  is  a 
pecuniary  obligation  running  from  the  promisee  to  the  beneficiary; 
"a  legal  right  founded  upon  some  obligation  of  the  promisee  in  the 
third  party  to  adopt  and  claim  the  promise  as  made  for  his  benefit" : 
secondly,  to  cases  where  the  contract  is  made  for  the  benefit  of  the 
wife,  affianced  wife,  or  child  of  a  party  to  the  contract.  The  close 
relationship  cases  go  to  the  early  King's  Bench  case  (1677),  long  since 
repudiated  in  England,  of  Dutton  v.  Poole,  2  Lev.  210.  The  natural 
and  moral  duty  of  the  husband  or  parent  to  provide  for  the  future 
of  wife  or  child  sustains  the  action  on  the  contract  made  for  their 
benefit.  "This  is  the  farthest  the  cases  in  this  state  have  gone,"  says 
Cullen,  J.,  in  the  marriage  settlement  case  of  Borland  v.  Welch,  162 
N.  Y.  104,  no. 


82  COMMERCIAL    LAW    CASES 

The  right  of  the  third  party  is  also  upheld  in,  thirdly,  the  public 
contract  cases  where  the  municipality  seeks  to  protect  its  inhabitants 
by  covenants  for  their  benefit  and,  fourthly,  the  cases  where,  at  the  ■ 
request  of  the  party  to  the  contract,  the  promise  runs  directly  to  the 
beneficiary  although  he  does  not  furnish  the  consideration.  It  may 
be  safely  said  that  a  general  rule  sustaining  recovery  at  the  suit  of 
the  third  party  would  include  but  few  classes  of  cases  not  included 
in  these  groups,  either  categorically  or  in  principle. 

On  principle,  a  sound  conclusion  may  be  reached.  If  Mrs. 
Beman  had  left  her  husband  the  house  on  condition  that  he  pay  the 
plaintiff  $6,000  and  he  had  accepted  the  devise,  he  would  have  become 
personally  liable  to  pay  the  legacy  and  plaintiff  could  have  recovered 
in  an  action  at  law  against  him,  whatever  the  value  of  the  house. 
That  would  be  because  the  testatrix  had  in  substance  bequeathed  the 
promise  to  the  plaintiff  and  not  because  close  relationsliip  or  moral 
obligation  sustained  the  contract.  The  distinction  between  an  im- 
plied promise  to  a  testator  for  the  benefit  of  a  third  party  to  pay  a 
legacy  and  an  unqualified  promise  on  a  valuable  consideration  to 
make  provision  for  the  third  party  by  will  is  discernible  but  not 
obvious.  The  tendency  of  American  authority  is  to  sustain  the  gift 
in  all  such  cases  and  to  permit  the  donee-beneficiary  to  recover  on  the 
contract, 

22.     Privity  to  Consideration.    (Minority  Rul».) 

Exchange  Bank  of  St.  Louis  z'.  Rice.  10/  Mass.  j/. 

Hill,  at  St.  Louis,  consigned  cotton  to  the  defendants  in  Boston 
and  drew  on  them  a  draft  for  $3,300,  payable  to  the  order  of 
Pitman  &  Company.  The  draft  was  indorsed  by  Pitman  &  Com- 
pany to  the  plaintiff  bank,  which  discounted  it  and  presented  it 
before  maturity  to  the  defendants,  who  refused  to  accept  it  in 
spite  of  the  fact  that  they  had  w-ritten  Hill  that  they  would  honor 
the  draft. 

Held,  that  the  plaintiff  cannot  recover  for  the  reason  that  it  was 
not  a  party  to  the  consideration. 

Gray,  J. 

The  general  rule  of  law  is,  that  a  person  who  is  not  a  party  to 
a  simple  contract,  and  from  whom  no  consideration  moves,  cannot 
sue  on  the  contract,  and  consequently  that  a  promise  made  by  one 
person  to  another,  for  the  benefit  of  a  third  person  who  is  a  stranger 
to  the  consideration,  will  not  support  an  action  by  the  latter. 

The  first  and  principal  exception  to  the  general  rule,  consists 
of  those  cases  in  which  the  defendant  has  in  his  hands  money  which 
in  equity  and  good  conscience  belongs  to  the  plaintiff,  as  where  one 
person  receives  from  another  money  or  property  as  a  fund  from 
which  certain  creditors  of  the  depositor  are  to  be  paid,  and  promises, 
either  exjiressly,  or  by  implication  from  his  acceptance  of  the  money 


FORMATIOM    OF    CONTRACTS  83 

or  property  without  objection  to  the  terms  on  which  it  is  delivered 
to  him,  to  pay  such  creditors. 

The  only  illustration  which  the  decisions  of  this  court  afford 
of  the  second  class  of  exceptions,  is  Felton  v.  Dickinson,  10  Mass. 
287,  in  which  it  was  held,  in  accordance  with  a  number  of  early 
English  authorities,  and  hardly  argued  against  that  a  son  might  sue 
upon  a  promise  made  for  his  benefit  to  his  father. 

The  third  exception  is  the  case  of  Brewer  v.  Dyer,  7  Cush.  337, 
in  which  the  defendant  made  a  written  promise  to  the  lessee  of  a 
shop  to  take  his  lease  (which  was  under  seal)  and  pay  the  rent  to 
the  lessor  accordingly  to  its  terms,  entered  into  possession  of  a  shop 
with  the  lessor's  knowledge,  paid  him  the  rent  quarterly  for  a  year, 
and  then  before  the  expiration  of  the  lease  left  the  shop,  and  was 
held  liable  to  an  action  by  the  lessor  for  the  rent  subsequently  ac- 
cruing. That  case  may  perhaps  be  supported  on  the  ground  that 
such  payment  and  receipt  of  the  rent  after  the  agreement  between 
the  defendant  and  the  lessee  warranted  the  inference  of  a  direct 
promise  by  the  defendant  to  the  lessor  to  pay  the  rent  to  him  for 
the  residue  of  the  term.  It  certainly  cannot  be  reconciled  with  the 
later  authorities,  without  limiting  it  to  its  own  special  circumstances, 
and  affords  no  safe  guide  in  the  decision  of  the  present  case. 

In  the  case  at  bar,  the  plantift's  had  acquired  no  title  in  the 
cotton  against  which  the  draft  was  drawn.  The  bill  of  lading  was 
not  attached  to  the  draft,  or  made  payable  to  the  holder  thereof,  or 
delivered  to  the  plaintiffs.  The  cotton  was  not  of  sufficient  value  to 
pay  the  draft,  and  the  balance  of  account  between  the  defendants  and 
the  drawer,  at  the  time  of  their  receipt  and  sale  of  the  cotton,  and 
ever  since,  was  in  favor  of  the  defendants.  There  is  no  ground 
therefore  for  implying  a  promise  from  the  defendants  to  the  plaintiff's 
to  pay  to  them  cither  the  amount  of  the  draft  or  the  proceeds  of  the 
cotton.  The  plaintiffs  did  not  take  the  draft,  or  make  advances, 
upon  the  faith  of  any  promise  of  the  defendants,  or  of  any  actual 
receipt  by  them  of  the  cotton  or  the  bill  of  lading,  but  solely  upon 
the  faith  of  the  drawer's  signature  and  implied  promise  that  the  de- 
fendants should  have  funds  to  meet  the  draft.  The  whole  considera- 
tion for  the  defendants'  promise  moved  from  the  drawer  and  not  from 
the  plaintiffs.  And  the  defendants  made  no  promise  to  the  plaintiffs. 
Their  only  promise  to  accept  the  draft  was  made  to  Hill,  the  drawer, 
after  the  draft  had  been  negotiated  to  the  plaintiffs :  and  there  is  no 
proof  that  the  defendants  authorized  that  promise  to  be  shown  to  the 
plaintiffs,  or  that  Hill,  to  whom  that  promise  was  made,  was  an 
agent  of  the  plaintiffs.  His  relation  to  them  was  that  of  drawer  and 
payee,  not  of  agent  and  principal.  To  infer,  as  suggested  in  behalf 
of  the  plaintiffs,  that  he  was  their  agent  in  receiving  the  defendants' 
promise,  so  that  they  might  sue  thereon  in  their  own  name,  would  be 
unsupported  by  any  facts  in  the  case,  and  would  be  an  evasion  of 
the  rules  of  the  law,  which  will  not  allow  any  person,  who  took  the 
draft  before  that  promise  was  made,  to  maintain  an  action  upon  that 
promise,  either  as  an  acceptance  or  a  promise  to  accept. 


84  COMMERCIAL    LAW    CASES 

23.     Subscriptions. 

The  Presbyterian  Church  v.  Cooper.  112  N.  Y.  51  y. 

Cooper  was  administrator  of  the  estate  of  Cook,  who  had 
signed  a  subscription  paper  promising  $5,500  for  the  purpose  of 
paying  ofif  a  mortgage  on  the  Church.  The  Church  sues  to  recover 
the  amount  of  the  subscription. 

Held,  that  a  subscription  for  charitable  or  other  purposes  is 
not  enforceable  for  want  of  consideration. 

Andrews,  J. 

It  has  sometimes  been  supposed  that  when  several  persons 
promise  to  contribute  to  a  common  object  desired  by  all,  the  promise 
of  each  may  be  a  good  consideration  for  the  promise  of  others,  and 
this  although  the  object  in  view  is  one  in  which  the  promisors  have 
no  pecuniary  or  legal  interest,  and  the  performance  of  the  promise 
by  one  of  the  promisors  would  not  in  a  legal  sense  be  beneficial  to 
the  others.  The  doctrine  seems  to  us  unsound  in  principle.  It 
proceeds  on  the  assumption  that  a  stranger  both  to  the  consideration 
and  the  promise,  and  whose  only  relation  to  the  transaction  is  that 
of  donee  of  an  executory  gift,  may  sue  to  enforce  the  payment  of 
the  gratuity  for  the  reason  that  there  has  been  a  breach  of  contract 
between  the  several  promisors  and  a  failure  to  carry  out  as  between 
themselves  their  mutual  engagement.  It  is  in  no  proper  sense  a 
case   of   mutual   promises,   as   between   the   plaintiff   and   defendant. 

In  the  disposition  of  this  case  we  must,  therefore,  reject  the 
mutual  promise  between  the  subscribers,  because  there  is  no  privity 
of  contract  between  the  plaintiff  and  the  promisors.  Some  considera- 
tion must,  therefore,  be  found  other  than  that  expressly  stated  in 
the  subscription  paper,  in  order  to  sustain  the  action.  It  is  urged 
that  a  consideration  may  be  found  in  the  efforts  of  the  trustees  of 
the  plaintiff  during  the  year,  and  the  time  and  labor  expended  by 
them  during  that  time,  to  secure  subscriptions  in  order  to  fulfill  the 
condition  upon  which  the  liability  of  the  subscribers  depended. 
Tbere  is  no  doubt  that  labor  and  services,  rendered  by  one  party  at 
the  request  of  another,  constitute  a  good  consideration  for  a  promise 
made  by  the  latter  to  the  former,  based  on  the  rendition  of  the 
service.  But  the  plaintiff  encounters  the  difficulty  that  there  is  no 
evidence,  express  or  implied,  on  the  face  of  the  subscription  paper, 
nor  any  evidence  outside  of  it,  that  the  corporation  or  its  trustees 
did,  or  undertook  to  do  anything  upon  the  invitation  or  request  of 
the  subscribers.  Nor  is  there  any  evidence  that  the  trustees  of  the 
plaintiff,  as  representatives  of  the  corporation,  in  fact  did  anything 
in  their  corporate  capacity,  or  otherwise  than  as  individuals  inter- 
ested in  promoting  tlie  general   object  in  view. 

Leaving  out  of  the  subscription  paper  the  affirmative  statement 
of  the  consideration    (which,  for  reasons  stated,  may  be  rejected), 


FORMATION    OF    CONTRACTS  85 

it  stands  as  a  naked  promise  of  the  subscribers  to  pay  the  several 
amounts  subscribed  by  them  for  the  purpose  of  paying  the  mortgage 
on  the  church  property  upon  a  condition  precedent  limiting  their 
liability.  Neither  the  church  nor  the  trustees  promise  to  do  any- 
thing, nor  are  they  requested  to  do  anything,  nor  can  such  a  request 
be  implied. 

IV. 

CAPACITY  OF  PARTIES. 

The  parties  to  a  contract  must  be  under  no  legal  incapacity. 
While  all  persons  are  in  a  sense  capable  of  contracting,  there  are 
certain  relative  disabilities  extending  to  infants,  insane  persons, 
and  in  some  measure  to  married  women. 

Some  contracts  of  an  infant  are  valid,  most  of  them  are  void- 
able, and  in  certain  jurisdictions  a  few  are  void.  The  following 
contracts  of  an  infant  are  binding: 

1.  Executed  contracts  for  the  purchase  of  necessaries,  which 
are  strictly  speaking  quasi  contracts :  the  law  imposes  the 
obligation  regardless  of  contractual  capacity.  The  cir- 
cumstances of  the  infant  determine  what  are  necessaries. 
Money  itself  is  not  a  necessary  unless  expended  under 
the  direction  of  the  lender  for  necessaries. 

2.  A  contract  which  an  infant  may  be  compelled  to  execute 
by  equity  or  by  authority  of  law. 

3.  An  executed  contract  beneficial  as  a  matter  of  law  to  an 
infant  who  is  unable  to  restore  the  other  party  to  his 
original  position. 

In  most  jurisdictions,  all  other  contracts  of  an  infant  may  be 
rescinded  by  him  at  will.  Some  jurisdictions  consider  a  few  con- 
tracts of  an  infant,  particularly  those  concerning  the  appointment 
of  an  agent,  void.  There  is  also  a  rule  in  some  courts  that 
when  an  infant  has  made  a  contract  beneficial  to  himself,  he  can- 
not rescind  unless  he  returns  the  consideration.  Other  jurisdic- 
tions hold  that  an  infant  may  rescind  even  those  contracts  with- 
out returning  the  consideration  unless  he  has  it,  and  unless  it  is 
a  contract  which  by  law  may  be  pronounced  to  be  for  his  benefit. 

Upon  reaching  his  majority  (the  age  of  twenty-one  in  most 
states),  the  infant  must  ratify  or  disaffirm  a  voidable  contract 
previously  made. 

Ratification  may  be  express  or  by  conduct.  No  particular  form 
of  ratification  is  required  except  in  those  jurisdictions  where  the 
matter  is  regulated  by  statute.  Mere  lapse  of  time  after  coming 
of  age,  coupled  with  enjoyment  of  the  proceeds  of  the  contract, 


86  COMMERCIAL    LAW    CASES 

is  sufficient  to  warrant  an  inference  of  ratification.  The  person 
must  know  all  facts  connected  with  the  contract  ratified,  but  this 
requirement  does  not  ordinarily  extend  to  the  necessity  of  knowl- 
edge of  the  right  to  rescind.  Mere  acknowledgment  of  a  debt 
does  not  constitute  ratification. 

The  protection  which  the  law  gives  to  an  infant  does  not  re- 
lieve him  from  responsibility  for  his  torts.  An  infant  is  liable 
for  all  torts  which  do  not  arise  out  of  the  subject  matter  of  a 
voidable  contract. 

Contracts  of  insane  persons  are  considered  upon  much  the 
same  basis  as  contracts  of  infants.  In  order  that  insanity  shall 
afifect  contractual  capacity,  it  must  prevent  the  mind  of  the  insane 
person  from  freely  meeting  with  that  of  the  other  party  upon 
the  subject  matter  of  the  contract.  Insane  persons  are  liable  for 
necessaries,  and  are  bound  by  contracts  which  they  may  be  com- 
pelled by  law  to  execute.  If  there  has  been  an  adjudication  of 
insanity,  their  contracts  are  entirely  void  in  most  jurisdictions, 
while  contracts  made  prior  to  such  adjudication  are  merely  void- 
able. An  insane  person's  contracts  may  be  ratified  or  avoided  by 
him  upon  his  recovering  sanity  and  upon  his  death  may  be  ratified 
or  avoided  by  his  heirs  and  representatives  whether  he  has  re- 
covered sanity  or  not.  Knowledge  of  insanity  by  the  other  con- 
tracting party  is  immaterial;  but  many  jurisdictions  consider  that 
an  insane  person  may  not  disaffirm  a  contract  without  returning 
the  consideration. 

The  disability  of  married  women  has  now  been  almost  entirely 
removed  by  statute  in  most  jurisdictions.  Formerly  a  married 
woman  could  not  contract  unless  her  husband  was  civilly  dead  or 
had  abandoned  the  country.  At  the  present  time,  married  women 
are  still  unable  to  contract  with  their  husbands,  unless  the  right 
has  been  specifically  given  by  statute,  as  in  New  York.  Apart 
from  this  restriction,  enabling  statutes  passed  in  practically  all 
states  have  brought  it  about  that  a  woman's  contractual  rights  are 
not  affected  by  marriage. 

A.     Contracts  of  Infants. 

I.     Contracts  of  Infants  in  General. 

Riley  v.  Mallory.  jj  Conn.  201. 

Riley,  a  minor,  bought  a  gun  from  the  defendant  Mallory. 
After  he  has  used  the  gun  for  some  time,  he  attempts  to  disaffirm 
the  C(jntract  and  secure  the  return  of  his  money. 

Held,  that  most  contracts  of  an  infant  are  voidable,  and  may 
be  rescinded  at  his  election. 


FORMATION  OF  CONTRACTS  87 

Butler,  J. 

The  privilege  of  an  infant  to  avoid  contracts  which  are  in- 
jurious to  him,  and  rescind  those  which  are  not,  is  not  an  exception 
to  a  general  rule,  but  a  general  rule  with  exceptions.  The  law 
assumes  the  incapacity  of  an  infant  to  contract.  It  also  recognizes 
the  fact  that  the  limitation  of  infancy  is  arbitrary ;  that  it  is  indis- 
pensably necessary  that  an  infant  should  be  at  liberty  to  contract 
for  necessaries ;  and  that  he  may  happen  to  make  other  contracts 
which  will  be  beneficial  to  him.  It  does  not  therefore  forbid  him 
to  contract,  but  gives  him  for  his  protection  the  privilege  of  avoiding 
contracts  which  are  injurious  to  him  and  rescinding  all  others, 
whether  fair  or  not,  whether  executed  or  executory,  and  as  well 
before  as  after  he  arrives  at  full  age — excepting  from  the  operation 
of  the  privilege  only  contracts  for  necessaries,  contracts  which  he 
may  be  compelled  in  equity  to  execute,  and  executed  contracts  where 
he  has  enjoyed  the  benefit  of  them  and  cannot  restore  the  other  party 
to  his  original  position.  These  exceptions  are  founded  in  the  neces- 
sities of  the  infant,  or  required  by  a  just  regard  for  the  equitable 
rights  of  others. 


2.    Contracts  for  Necessaries. 

Tupperv.  Cadzvell.  12  Mete.  (Mass.)  55g. 

Tupper  repaired  a  dwelling  house  for  Cadwell,  a  minor,  such 
repairs  being  necessary  to  prevent  immediate  and  serious  in  jury- 
to  the  house.  In  a  suit  for  payment,  Cadwell  defends  on  the 
ground  of  infancy. 

Held,  that  this  is  not  a  case  of  "necessaries"  for  which  an 
infant  is  liable. 

Dewey,  J. . 

An  infant  may  make  a  valid  contract  for  necessaries ;  and  the 
matter  of  doubt  in  the  present  case  is,  what  expenditures  are  em- 
braced in  the  terms  "necessaries."  It  is  said,  an  infant  may  bind 
himself  to  pay  for  his  necessary  meat,  drink,  apparel,  and  such  other 
necessaries,  and  likewise  for  his  good  teaching  or  instruction,  whereby 
he  may  profit  himself  afterwards.  The  term  ''necessaries,"  it  is 
well  settled,  also  embraces  necessary  articles  for  the  support  of  his 
wife  and  children,  if  he  has  such  to  maintain.  The  wants  to  be 
supplied  are.  however,  personal ;  either  those  for  the  body,  as  food, 
clothing,  lodging,  and  the  like ;  or  those  necessary  for  the  proper 
cultivation  of  the  mind,  as  instruction  suitable  and  requisite  to  the 
useful  development  of  the  intellectual  powers,  and  qualifying  the 
individual  to  engage  in  business  when  he  shall  arrive  at  the  age  of 
manhood. 

It  has  sometimes  been  contended  that  it  was  enough  to  charge 


88  COMMERCIAL    LAW    CASES 

the  party,  though  a  minor,  that  the  contract  was  one  plainly  beneficial 
to  him  in  a  pecuniary  point  of  view.  That  proposition  is  by  no 
means  true,  if,  by  it,  it  be  intended  to  sanction  an  inquiry,  in  each 
particular  case,  whether  the  expenditure,  or  articles  contracted  for, 
were  beneficial  to  the  pecuniary  interests  of  the  minor.  The  ex- 
penditures are  to  be  limited  to  cases  where,  from  their  very  nature, 
expenditures  for  such  purposes  would  be  beneficial ;  or,  in  other 
words,  they  must  belong  to  a  class  of  expenditures  which  are  in  law 
termed  beneficial  to  the  infant.  What  subjects  of  expenditures  are 
included  in  this  class  is  a  matter  of  law,  to  be  decided  by  the  court. 
The  further  inquiry  may  often  arise,  whether  expenditures,  though 
embraced  in  this  class,  were  necessary  and  proper  in  the  particular 
case;  and  this  may  present  a  question  of  fact. 

No  necessity  can  exist  for  expenditures  [upon  real  estate  of 
the  character  and  under  the  circumstances  here  stated]  solely  upon 
the  credit  of  the  minor.  The  fact  that  he  has  real  estate  which 
may  require  supervision,  and  may  need  repairs,  furnishes  occasion 
for  the  appointment  of  a  guardian. 

3.    Executory  Contracts  for  Necessaries. 

Gregory  v.  Lee.  64  Conn.  407. 

Lee,  a  minor  student  at  Yale  University,  hired  a  room  from 
Gregory  for  the  college  year  of  forty  weeks.  After  occupying 
the  room  for  three  months,  he  gave  it  up,  and  the  plaintiff  brings 
this  action  against  him  for  the  rent  for  the  balance  of  the  term. 

Held,  that  an  infant  may  repudiate  an  executory  contract 
whether  for  necessaries  or  not. 

Torrance,  J. 

This  room  at  the  time  the  defendant  hired  it,  and  during  the 
time  he  occupied  it,  came  within  the  class  called  "necessaries,"  and 
also  to  him  during  said  period  it  was  an  actual  necessary ;  for  lodging 
comes  clearly  within  the  class  of  necessaries,  and  the  room  in  ques- 
tion was  a  suitable  and  proper  one,  and  during  the  period  he  occupied 
it,  was  his  only  lodging  room.  "Things  necessary,  are  those  without 
which  an  individual  cannot  reasonably  exist.  In  the  first  place, 
food,  raiment,  lodging,  and  the  like.     About  these  there  is  no  doubt." 

So  long  then  as  the  defendant  actually  occupied  the  room  as  his 
sole  lodging  room  it  was  clearly  a  necessary  to  him,  for  the  use  of 
which  the  law  would  compel  him  to  pay;  but  as  he  paid  the  agreed 
price  for  the  time  he  actually  occupied  it,  no  question  arises  upon 
that  part  of  the  transaction  between  these  parties. 

The  question  now  is  whether  he  is  bound  to  pay  for  the  room 
after  December  20th,  1892.  The  obligation  of  an  infant  to  pay  for 
necessaries  actually  furnished  to  him  does  not  seem  to  arise  out  of 
a  contract  in  the  legal  sense  of  that  term,  but  out  of  a  transaction 


FORMATION    OF    CONTRACTS  89 

of  a  qua^i  contractual  nature;  for  it  may  be  imposed  on  an  infant 
too  young  to  understand  the  nature  of  a  contract  at  all.  And  where 
an  infant  agrees  to  pay  a  stipulated  price  for  such  necessaries,  the 
party  furnishing  them  recovers  not  necessarily  that  price  but  only 
the  fair  and  reasonable  value  of  the  necessaries.  This  being  so,  no 
binding  obligation  to  pay  for  necessaries  can  arise  until  they  have 
been  supplied  to  the  infant;  and  he  cannot  make  a  binding  executory 
agreement  to  purchase  necessaries. 

As  a  general  rule,  with  but  few  exceptions,  an  infant  may  avoid 
his  contracts  of  every  kind,  whether  beneficial  to  him  or  not,  and 
whether  executed  or  executory.  The  alleged  agreement  in  this  case 
does  not  come  within  any  of  the  recognized  exceptions  to  this  rule. 
In  this  case  the  defendant  gave  up  the  room  and  repudiated  the  agree- 
ment, so  far  as  it  was  in  his  power  to  do  so,  in  the  most  positive 
and  unequivocal  manner. 

The  plea  of  infancy  then,  under  the  circumstances,  must  prevail. 

4.     Money  as  a  Necessary. 

Kilgorc  v.  Rich.  83  Me.  J03. 

Kilgore,  at  the  request  of  Rich,  an  infant,  paid  for  him  a  board 
bill  which  he  had  previously  contracted  while  attending  school. 
In  a  suit  for  this  money.  Rich  pleads  infancy  as  a  defense. 

Held,  that,  while  money  loaned  is  not  a  necessary,  money  ex- 
pended for  necessaries  for  an  infant,  at  his  request,  represents 
a  binding  obligation, 

Peters,  J. 

It  was  ruled  at  the  trial  than  an  infant  being  liable  to  one 
person  for  such  a  bill,  could  make  himself  liable  to  another  who 
should  pay  such  bill  for  him  at  his  request;  the  liability  to  such 
other  person  not  to  be  measured  by  the  amount  actually  paid,  but 
limited,  irrespective  of  the  contract  price,  to  such  sum  as  would 
be  a  reasonable  compensation  for  the  board.  This  ruling  is  well 
supported  by  the  authorities. 

The  infant's  liability  is  in  no  way  enlarged  by  owing  the  debt 
to  one  rather  than  to  another.  The  rule  lends  no  temptation  to 
create  a  debt  as  it  is  already  created.  The  right  to  transfer  the 
liability  from  one  to  another  might  be  a  great  convenience  to  a  minor. 
One  creditor  might  be  unable  or  unwilling  to  wait  for  payment, 
while  a  friend  and  acquaintance,  as  a  substituted  creditor,  might 
be  accommodating  in  that  respect.  It  would  give  a  self-supporting 
minor  more  facilities  for  support.  We  have  not,  in  our  examination 
of  authorities,  noted  any  case  that  opposes  the  principle.  It  was 
held  that  an  infant  who  was  threatened  with  arrest  upon  a  process 
sued  out  against  him  on  a  debt  for  necessaries,  would  be  liable  to 
a  person  who,  at  his  request,  advanced  money  to  release  him.    In  that 


90  COMMERCIAL    LAW    CASES 

case  there  was  legal  pressure,  but  in  many  instances  moral  pressure 
would  be  great.  Where  an  infant  bought  an  outfit  for  a  whaling 
voyage,  drawing  for  the  amount  of  the  bill  on  the  plaintiffs,  who 
accepted  the  bill  and  paid  it  when  it  became  due,  they  were  allowed 
to  collect  of  the  infant  what  the  goods  were  reasonably  worth  to  him, 
in  an  action  for  money  paid  on  his  account.  So  a  person  who  signed 
an  infant's  note  given  for  necessaries,  as  a  surety,  was  allowed 
after  payment  of  the  note  to  recover  the  amount  paid;  not  upon 
the  note,  but  as  money  paid   for  the  benefit  of  the   infant. 

The  defendant  relies  on  the  rule  generally  prevailing  in  the 
cases  that  money  is  not  a  necessary,  though  lent  to  an  infant  who 
afterwards  purchases  necessaries  with  it.  But  one  who  pays  money 
at  his  request  to  a  third  person  for  necessaries  can  recover  it. 
The  difference  is  between  lending  and  paying.  The  doctrine  adopted 
in  late  American  cases,  [is]  that  a  person  who  lends  money  to  an 
infant  to  purchase  "specific"  necessaries  stands  in  the  position  of 
the  tradesman  who  furnishes  the  necessaries. 

5.     Contracts  Which  an  Infant  may  be  Compelled  by  Law  to 
Perform. 

Elliott  V.  Home.  10  Ala.  ^48. 

James  Cobb,  in  order  to  defraud  his  creditors,  took  title  to  a 
piece  of  property  in  the  name  of  his  son,  John,  a  minor.  Later, 
John,  at  the  direction  of  his  father,  executed  a  deed  to  Herndon,  a 
creditor  of  the  father,  through  whom  one  of  the  parties  claims. 
The  other  parties  claim  under  a  later  deed  from  John  Cobb  after 
he  came  of  age. 

Held,  that  the  deed  to  Herndon  was  good,  as  it  was  a  convey- 
ance which  the  infant  could  have  been  compelled  by  law  to  make. 

Ormond,  J . 

Here  the  infant,  though  the  legal  title  was  cast  upon  him  by 
the  fraudulent  conduct  of  his  father,  had  no  right  to  the  land 
against  a  creditor,  or  purchaser;  when,  therefore,  he  conveyed  to 
the  purchaser  from  his  father,  he  merely  parted  with  the  naked 
title,  and  only  did  that  which  a  court  of  equity  would  have  com- 
pelled him  to  do,  and  we  are  unable  to  perceive  any  reason  for  per- 
mitting him,  by  a  disaffirmance  of  this  act,  to  reinvest  himself  with 
the  title  to  be  again  deprived  of  it. 

We  do  not  understand  the  law  to  be  that  every  act  of  an  in- 
fant, though  it  be  by  deed,  is  voidable  at  his  election  on  his  attaining 
his  majority.  It  is  an  ancient  maxim  of  the  common  law,  that 
"generally,  whatsoever  an  infant  is  bound  to  do  by  law,  the  same 
shall  bind  him,  albeit  he  doth  it  without  suit  of  law."  This  point 
was  so  determined  in  the  case  of  an  infant  mortgagee,  in  whom 
the  title  was  vested,  who,  upon  the  payment  of  the  mortgage  debt  to 


FORMATION    OF    CONTRACTS  QI 

the  persons  entitled  to  receive  it,  made  a  re-conveyance  of  the  land, 
and  the  court  held,  that  as  this  was  an  act  which  by  law  he  could 
be  compelled  to  perform,  his  voluntary  performance  of  it,  though 
during  minority,  should  bind  him,  and  he  could  not  afterwards  dis- 
affirm it.  We  are  aware  that  this  celebrated  judgment  has  been  the 
subject  of  some  critical  animadversion,  on  account  of  some  of  the 
general  positions  advanced  by  Lord  Mansfield.  The  true  point  of 
the  case  has  never  been  seriously  questioned,  but  is  admitted  to  be 
law  by  the  highest  authority  at  the  present  day. 

6.     Contracts  of  Which  an  Infant  has  Enjoyed  the  Benefit. 

Breed  v.  Jiidd.  i  Gray  {Mass.)  455. 

Breed,  a  minor,  seeks  to  recover  money  paid  by  him  to  the 
defendants,  under  an  agreement  whereby  they  furnished  an  out- 
fit to  enable  him  to  go  to  Cahfornia,  and  received  one-third  of  his 
earnings  while  he  was  away. 

Held,  that  having  executed  a  contract  beneficial  to  him  as  a 
matter  of  law,  an  infant  cannot  afterwards  disatifirm  it. 

Thomas,  J. 

Not  having  means  of  his  own,  he  enters  into  an  arrangement 
with  the  defendants  to  furnish  them,  upon  a  special  agreement, 
indeed,  but  reasonable  and  beneficial  in  its  terms.  Viewing  the  con- 
tract in  this  light,  or  as  an  agreement  for  the  services  of  the  plaintiff 
for  a  limited  time,  to  be  repaid  by  the  advancement  and  by  retain- 
ing also  two  thirds  of  the  fruits  of  his  labor,  it  would,  if  fairly  made 
and  fully  executed,  be  within  the  principles,  if  not  within  the  direct 
authority  of  Stone  v.  Dennison,  13  Pick.  i. 

In  that  case,  the  plaintiff,  an  infant  over  fourteen  years  of  age, 
made  an  agreement  with  the  defendant,  his  guardian  assenting,  by 
which  he  was  to  continue  in  the  service  of  the  defendant  till  he 
should  arrive  at  the  age  of  twenty-one,  for  his  board,  lodging,  and 
education;  and  it  was  held,  that  the  plaintiff  not  having  been  over- 
reached in  the  contract,  and  the  contract  not  being  so  unreasonable 
in  itself  as  to  raise  a  suspicion  of  fraud,  and  having  been  fully 
executed  on  both  sides,  the  plaintiff  could  not  maintain  a  quantum 
meruit  for  his  services,  by  showing  that  in  the  event,  as  it  happened, 
his  services  were  worth  more  than  the  stipulated  compensation.  In- 
deed, to  say  that  an  infant  could  make  no  contract  for.  his  labor, 
however  reasonable  and  beneficial  to  himself,  by  which  he  should  be 
bound,  even  when  fully  executed  on  both  sides,  instead  of  serving 
as  a  protection  to  the  infant,  would  have  the  effect  only  to  prevent 
his  being  employed.  Men  of  business  want  to  know  beforehand  what 
they  have  got  to  pay,  and  also  to  know  that  when  an  agreement  for 
labor,  reasonable  and  just,  has  been  justly  made  and  fully  executed, 
and  the  price  paid,  there  is  an  end  of  the  matter. 


92  COMMERCIAL    LAW    CASES 

7.     Conditions  Under  Which  Infant  May  Rescind.    (Majority 
Rule.) 

Johnson  v.  Northwestern  Mutual  Life  Insurance  Co.  56  Minn. 
365- 

Johnson,  a  minor,  insured  his  hfe  with  the  Insurance  Company 
upon  a  participating  basis.  Immediately  upon  his  coming  of  age, 
he  gave  notice  that  he  wished  to  avoid  the  pohcy,  and  demanded 
a  return  of  the  money  he  had  paid.  He  brings  this  action  to  re- 
cover that  money. 

Held,  that  according  to  the  Minnesota  rule  an  infant  is  not 
entitled  to  recover  what  he  paid  for  a  benefit  unless  he  can  return 
the  consideration. 

Mitchell,  J. 

The  following  propositions  are  well  settled,  everywhere,  as  to 
the  rescindable  contracts  of  an  infant,  and  in  that  category  we 
include   all   contracts   except   for   necessaries : 

First.  That,  in  so  far  as  the  contract  is  executory  on 
the  part  of  an  infant,  he  may  always  interpose  his  infancy 
as  a  defense  to  an  action  for  its  enforcement.  He  can  always 
use  his  infancy  as  a  shield. 

Second.  If  the  contract  has  been  wholly  or  partly  per- 
formed on  his  part,  but  is  wholly  executory  on  part  of  the 
other  party,  the  minor  having  received  no  benefits  from  it, 
he  may  recover  back  what  he  has  paid  or  parted  with. 

Third.  Where  the  contract  has  been  wholly  or  partly 
performed  on  both  sides,  the  infant  may  always  rescind,  and 
recover  back  what  he  has  paid,  upon  restoring  what  he  has 
received. 

Fourth.  A  minor,  on  arriving  at  full  age,  may  avoid  a 
conveyance  of  his  real  estate  without  being  required  to  place 
the  grantee  in  statu  quo,  although  a  different  rule  has  some- 
times been  adopted  by  courts  of  equity  when  the  former  infant 
has  applied  to  them  for  aid  in  avoiding  his  deeds.  Whether 
this  distinction  between  conveyances  of  real  property  and  per- 
sonal contracts  is  founded  on  a  technical  rule,  or  upon  con- 
siderations of  policy  growing  out  of  the  difference  between 
real  and  personal  property,  it  is  not  necessary  here  to  con- 
sider. 

Fifth.  Where  the  contract  has  been  wholly  or  partly 
performed  on  both  sides,  the  infant,  if  he  sues  to  recover 
back  what  he  has  paid,  must  always  restore  what  he  has 
received,  in  so   far  as  he  still   retains  it  in  specie. 

Sixth.     The    courts    will    always    grant    an    infant    relief 


FORMATION    OF    CONTRACTS  93 

where  the  other  party  has  been  guilty  of  fraud  or  undue 
influence.  As  to  what  would  constitute  a  sufficient  ground 
for  relief  under  this  head,  and  what  relief  the  courts  would 
grant  in  such  cases,  we  will  refer  to  hereafter. 

But  suppose  that  the  contract  is  free  from  all  elements  of 
fraud,  unfairness,  or  overreaching,  and  the  infant  has  enjoyed  the 
benefits  of  it,  but  has  spent  or  disposed  of  what  he  has  received, 
or  the  benefits  received  are,  as  in  this  case,  of  such  a  nature  that 
they  cannot  be  restored.  Can  he  recover  back  what  he  has  paid? 
It  is  well  settled  in  England  that  he  cannot. 

At  least  a  respectable  minority  of  the  American  decisions  are 
in  full  accord  with  what  we  have  termed  the  "English  rule."  But 
many — perhaps  a  majority — of  the  American  decisions,  apparently 
thinking  that  the  English  rule  does  not  sufficiently  protect  the 
infant,  have  modified  it;  and  some  of  them  seem  to  have  wholly 
repudiated  it,  and  to  hold  that,  although  the  contract  was  in  all 
respects  fair  and  reasonable,  and  the  infant  had  enjoyed  the  benefits 
of  it,  yet  if  the  infant  had  spent  or  parted  with  what  he  had  re- 
ceived, or  if  the  benefits  of  it  were  of  such  a  nature  that  they  could 
not  be  restored,  still  he  might  recover  back  what  he  had  paid.  The 
problem  with  the  courts  seems  to  have  been,  on  the  one  hand,  to 
protect  the  infant  from  the  improvidence  incident  to  his  youth  and 
inexperience,  and  on  the  other  hand,  to  compel  him  to  conform 
to  the  principles  of  common  honesty.  The  result  is  that  the  Ameri- 
can authorities — at  least  the  later  ones — have  fallen  into  such  a 
condition  of  conflict  and  confusion  that  it  is  difficult  to  draw  from 
them  any  definite  or  uniform  rule. 

If  the  party  dealing  with  the  infant  was  guilty  of  actual  fraud 
or  bad  faith,  we  think  the  infant  should  be  allowed  to  recover  back 
all  he  had  paid,  without  making  restitution,  except,  of  course,  to  the 
extent  to  which  he  still  retained  in  specie  what  he  had  received.  Such 
a  case  would  be  a  contract  essentially  improvident,  calculated  to  facili- 
tate the  squandering  the  infant's  estate,  and  which  the  other  party 
knew,  or  ought  to  have  known  to  be  such,  for  to  make  such  a 
contract  at  all  with  an  infant  would  be  fraud.  But  if  the  contract 
was  free  from  any  fraud  or  bad  faith,  and  otherwise  reasonable, 
except  that  the  price  paid  by  the  infant  was  in  excess  of  the  value 
of  what  he  received,  his  recovery  should  be  limited  to  the  difference 
between  what  he  paid  and  what  he  received.  The  objections  to  this 
rule  are,  in  our  opinion,  largely  imaginary,  for  we  are  confident 
that  in  practice  it  can  and  will  be  applied  by  courts  and  juries  so 
as  to  work  out  substantial  justice. 

Our  conclusion  is  that  where  the  personal  contract  of  an  infant, 
beneficial  to  himself,  has  been  wholly  or  partly  executed  on  both 
sides,  but  the  infant  has  disposed  of  what  he  has  received,  or  the 
benefits  recovered  by  him  are  as  such  that  they  cannot  be  restored, 
he  cannot  recover  back  what  he  has  paid,  if  the  contract  was  a  fair 
and  reasonable  one,  and  free  from  any  fraud  or  bad  faith  on  part 
of  the  other  party,  but  that  the  burden  is  on  the  other  party  to  prove 


94  COMMERCIAL    LAW    CASES 

that  such  was  the  character  of  the  contract;  that,  if  the  contract 
involved  the  element  of  actual  fraud  or  bad  faith,  the  infant  may 
recover  all  he  paid  or  parted  with,  but  if  the  contract  involved 
no  such  elements,  and  was  otherwise  reasonable  and  fair,  except 
that  what  the  infant  paid  was  in  excess  of  the  value  of  what  he 
received,  his  recovery  should  be  limited  to  such  excess.  It  seems 
to  us  that  this  will  sufficiently  protect  the  infant,  and  at  the  same 
time  do  justice  to  the  other  party.  Of  course,  in  speaking  of  con- 
tracts beneficial  to  the  infant,  we  refer  to  those  that  are  deemed 
such  in  contemplation  of  law. 

Applying  these  rules  to  the  case  in  hand,  we  add  that  life 
insurance  in  a  solvent  company,  at  the  ordinary  and  usual  rates, 
for  an  amount  reasonably  commensurate  with  the  infant's  estate, 
or  his  financial  ability  to  carry  it,  is  a  provident,  fair,  and  reasonable 
contract,  and  one  which  is  entirely  proper  for  an  insurance  company 
to  make  with  him,  assuming  that  it  practices  no  fraud  or  other 
unlawful  means  to  secure  it;  and  if  such  should  appear  to  be  the 
character  of  this  contract  the  plaintiff  could  not  recover  the  premiums 
which  he  has  paid  in,  so  far  as  they  were  intended  to  cover  the 
current  annual  risk  assumed  by  the  company  under  its  policy. 

8.     Conditions  Under  Which  Infant  May  Rescind.    (Minority 
Rule.) 

Simpson  v.  Prudential  Insurance  Co.  184  Mass.  ^48. 

The  plaintiff,  Simpson,  a  minor,  sues  to  recover  the  premiums 
paid  by  her  on  a  life  insurance  policy  issued  to  her  by  the  defen- 
dant insurance  company.  There  had  been  certain  expenses  to  the 
defendant  in  keeping  the  policy  in  force,  and  the  defendant  con- 
tends  that  its  expenses  should  be  deducted  against  premiums. 

Held,  that  an  infant  may  rescind  without  returning  the  value 
of  benefits  received  under  an  executed  contract. 

Morton,  J. 

The  policy  was  what  is  termed  a  twenty-year  endowment  policy 
for  $500,  and  the  agreed  facts  state  that  there  was  no  fraud  or  undue 
influence  practised  upon  the  plaintiff  by  the  defendant  or  its  agents, 
and  that  the  contract  was  a  reasonable  and  prudent  one  for  a  person 
in  the  plaintiff's  situation  and  condition  in  life.  The  premiums  paid 
amounted  to  $54  and  it  is  agreed  that  the  expense  to  the  defendant 
of  keeping  the  policy  in  force  was  $28.72.  The  defendant  contends 
that  this  should  be  deducted  from  or  set  off  against  the  premiums  if 
the  plaintiff  is  allowed  to  recover  for  them. 

It  is  manifest,  we  think,  that  liowever  reasonable  and  prudent 
it  may  be  for  an  infant  to  take  out  a  policy  of  life  insurance,  it  does 
not  come  within  the  class  of  necessaries,  or  within  the  class  of  con- 


FORMATION    OF    CONTRACTS  95 

tracts  which  have  been  held  as  matter  of  law  to  be  beneficial  to  and 
therefore  binding  upon  an  infant.  It  is  only  when  the  contract  comes 
within  the  class  of  contracts  which  as  a  matter  of  law  are  binding  upon 
an  infant  that  the  question  of  its  reasonableness  and  prudence  is 
material. 

The  defendant  contends  that  the  contract  having  been  executed 
in  part  at  least  the  plaintiff  cannot  recover  without  making  the  de- 
fendant whole  for  the  expense  to  which  it  has  been  subjected.  But 
that  would  be  compelling  the  plaintiff  to  carry  out  to  that  extent  a 
contract  which  is  not  binding  on  her  and  which  she  may  avoid. 

It  is  well  settled  in  this  Commonwealth,  whatever  may  be  the  law 
elsewhere,  that  in  order  to  avoid  a  contract  an  infant  is  not  obliged 
to  put  the  other  party  in  statu  quo. 

g.    Ratification. 

Boyden  v.  Boyden.  p  Mete.  (Mass.)  §ip. 

The  defendants,  both  minors,  gave  a  note  to  Boyden  for  a 
horse  and  plow,  which  they  bought  from  him.  They  sold  the 
horse  and  kept  the  plow  after  they  came  of  age,  but  now  seek  to 
defend  on  the  ground  of  infancy  at  the  time  of  purchase. 

Held,  that  by  using  property  after  an  infant  comes  of  age, 
he  ratifies  the  contract  under  which  the  property  was  purchased. 

Shaw,  C.  J. 

If  a  minor  gives  a  written  promise  for  the  purchase  money  for 
goods  sold  to  him  by  an  adult  person,  the  contract  is  voidable  and 
not  void,  and  may  be  ratified  by  the  infant,  after  coming  of  age. 
It  is  also  well  settled,  that  it  is  the  privilege  of  the  minor  only  to 
disaffirm  the  contract,  and,  until  he  does  so,  the  other  party  is  bound 
by  it.  The  minor,  when  of  age,  may  regard  it  as  beneficial,  and  choose 
to  affirm  it.  But  if  he  elects  to  disaffirm  it,  he  annuls  it  on  both  sides, 
ab  initio,  and  the  parties  revert  to  the  same  situation  as  if  the  contract 
had  not  been  made.  If  the  minor  refuses  to  pay  the  price,  as  he  may, 
the  contract  of  sale  is  annulled,  and  the  goods  revest  in  the  vendor. 
But  until  some  notice  given  by  the  purchaser,  after  coming  of  age, 
of  his  purpose  to  annul  the  contract,  or  some  significant  act  done, 
the  vendor  cannot  reclaim  his  property,  and  his  taking  of  it  would 
be  a  trespass.  If,  therefore,  the  minor  purchaser,  after  coming  of 
age,  retains  the  specific  property,  treating  it  as  his  own,  when  it  is  in 
a  condition  to  be  restored,  and  it  is  of  any  value,  and  if,  for  an  un- 
reasonable time,  he  neglects  to  restore  it,  or  to  tender  it,  or  give 
notice  of  his  readiness  to  restore  it,  according  to  the  circumstances 
of  the  property  and  of  the  parties,  it  manifests  his  determination  to 
keep  the  property  and  affirm  the  contract.  And  further;  if,  after 
coming  of  age,  he  retains  the  property  for  his  own  use,  or  sells  or 
otherwise   disposes  of   it,   such  detention,   use   or   disposition — which 


96  COMMERCIAL    LAW    CASES 

can  be  conscientiously  done  only  on  the  assumption  that  the  contract 
of  a  sale  was  a  valid  one,  and  by  it  the  property  became  his  own — 
is  evidence  of  an  intention  to  affirm  the  contract,  from  which  a  ratifica- 
tion may  be  inferred.  In  the  present  case,  the  defendants  retained 
the  plow,  one  of  the  articles  for  which  the  note  was  given,  between 
two  and  three  years  after  they  both  came  of  age. 


ID.     Ratification  by  Lapse  of  Time. 

Goodiiow  V.  Empire  Lumber  Co.  j/  Minn.  468. 

Mrs.  Hamilton,  while  still  a  minor,  sold  property  to  Huff, 
under  whom  the  Lumber  Company  claims  title.  Mrs.  Hamilton's 
children  bring  an  action  to  avoid  the  conveyance,  a  number  of 
}ears  after  her  death,  which  occurred  when  she  was  twenty-five 
years  of  age.  They  contend  that  as  their  mother  was  a  minor 
when  she  made  the  deed,  they  may  avoid  the  conveyance. 

Held,  that  a  failure  to  disaffirm  a  conveyance  of  real  estate 
within  a  reasonable  time  after  coming  of  age  constitutes  rati- 
fication, 

Gilfillan,  C.  J. 

Must  one  who,  while  a  minor,  has  conveyed  real  estate,  dis- 
affirm the  conveyance  within  a  reasonable  time  after  minority  ceases, 
or  be  barred?  Of  the  decided  cases  the  majority  are  to  the  effect 
that  he  need  not  (where  there  are  no  circumstances  other  than  lapse 
of  time  and  silence),  and  that  he  is  not  barred  by  mere  acquiescence 
for  a  shorter  period  than  that  prescribed  in  the  statute  of  limitations. 

On  the  other  hand,  there  are  many  decisions  to  the  effect  that 
mere  acquiescence  beyond  a  reasonable  time  after  minority  ceases 
bars  the  right  to  disaffirm. 

The  rule  holding  certain  contracts  of  an  infant  voidable  (among 
them  his  conveyances  of  real  estate),  and  giving  him  the  right  to 
affirm  or  disaffirm  after  he  arrives  at  majority,  is  for  the  protection 
of  minors,  and  so  that  they  shall  not  be  prejudiced  by  acts  done  or 
obligations  incurred  at  a  time  when  they  are  not  capable  of  determining 
what  is  for  their  interest  to  do.  For  this  purpose  of  protection  the 
law  gives  them  an  opportunity,  after  they  have  become  capable  of 
judging  for  themselves,  to  determine  whether  such  acts  or  obligations 
are  beneficial  or  prejudicial  to  them,  and  whether  they  will  abide  by 
or  avoid  them.  If  the  right  to  affirm  or  disaffirm  extends  beyond  an 
adequate  opportunity  to  so  determine  and  to  act  on  the  result,  it 
ceases  to  be  a  measure  of  protection,  and  becomes,  "a  dangerous 
weapon  of  offence,  instead  of  a  defense."  For  we  cannot  assent  to 
the  reason  that  by  his  silent  acquiescence  he  occasions  no  injury  to 
other  |)ersons,  and  secures  no  benefits  or  new  rights  to  himself.  There 
is  nothing  to  urge  him  as  a  duty  to  otliers  to  act  speedily.     The  exist- 


FORMATION  OF  CONTRACTS  97 

ence  of  such  an  infirmity  in  one's  title  as  the  right  of  another  at  his 
pleasure  to  defeat  it,  is  necessarily  prejudicial  to  it;  and  the  longer 
it  may  continue,  the  more  serious  the  injury.  Such  a  right  is  a  con- 
tinual menace  to  the  title.  Holding  such  a  menace  over  the  title  is 
of  course  an  injury  to  the  owner  of  it;  one  possessing  such  a  right 
is  bound  in  justice  and  fairness  towards  the  owner  of  the  title  to 
determine  without  unnecessary  delay  whether  he  will  exercise  it.  The 
right  of  a  minor  to  disaffirm  on  coming  of  age,  like  the  right  to  dis- 
affirm in  any  other  case,  should  be  exercised  with  some  regard  to  the 
rights  of  others, — with  as  much  regard  to  those  rights  as  is  fairly 
consistent  with  due  protection  to  the  interests  of  the  minor. 

In  every  other  case  of  a  right  to  disaffirm,  the  party  holding 
it  is  required,  out  of  regard  to  the  rights  of  those  who  may  be  affected 
by  its  exercise,  to  act  upon  it  within  a  reasonable  time.  What  is  a 
reasonable  time  will  depend  on  the  circumstances  of  each  particular 
case,  and  may  be  either  for  the  court  or  for  the  jury  to  determine. 
Where,  as  in  this  case,  there  is  mere  delay,  with  nothing  to  explain 
or  excuse  it,  or  show  its  necessity,  it  will  be  for  the  court.  Three 
years  and  a  half,  the  delay  in  this  case  (excluding  the  period  of 
plaintiffs'  minority),  after  the  time  within  which  to  act  had  com- 
menced to  run,  was  prima  facie  more  than  a  reasonable  time,  and 
prima  facie  the  conveyance  was  ratified. 

II.    Ratification:     Knowledge   of    Right   of    Rescission    Im- 
material. 

Morse  v.  Wheeler.  4  Allen  (Mass,)  ^yo. 

Wheeler  bought  cattle  from  the  plaintiff  while  he  was  an  infant. 
After  he  came  of  age  he  promised  to  pay  the  balance  due,  but 
contends  that  he  is  not  liable  as  he  made  this  promise  without 
knowledge  that  he  was  not  bound. 

Held,  that  if  an  infant  subsequently  ratifies  a  contract,  the 
fact  that  he  did  not  know  he  might  repudiate  it  is  immaterial. 

Metcalf,  J.. 

It  is  a  long  established  legal  principle,  that  he  who  makes  a 
contract  freely  and  fairly  cannot  be  excused  from  performing  it  by 
reason  of  his  ignorance  of  the  law  when  he  made  it.  If,  however, 
an  exception  to  the  application  of  that  principle  to  a  case  like  this 
has  been  authoritatively  made,  the  defendant  is  entitled  to  the  benefit 
of  it.  But  we  do  not  find  that  such  an  exception  has  ever  been  made 
by  any  judicial  decision,  unless  it  be  in  a  case  in  Pennsylvania.  The 
notion  of  such  an  exception  had  its  origin  in  the  opinion  of  Lord 
Alvanley  as  reported  in  an  action  for  goods  sold  and  delivered,  to 
which  there  was  a  plea  of  infancy,  and  a  replication  of  a  promise 
after  full  age.  The  evidence  was,  that  the  defendant,  after  he 
attained  full  age,  on  payment  being  demanded  of  him,  and  on  being 


98  COMMERCIAL   LAW    CASES 

threatened  with  an  arrest,  promised  to  give  his  note  for  the  goods, 
but  afterwards  refused  to  give  it.  Lord  Alvanley  said  that  the  de- 
fendant "might  bind  himself  by  a  new  promise  after  he  obtained 
full  age,  but  that  he  held  that  such  promise  must  be  voluntary,  and 
given  with  knowledge  that  he  then  stood  discharged  by  law ;  that 
where  an  infant,  under  the  terror  of  an  arrest,  had  a  promise  extorted 
from  him,  or  where  it  was  given  ignorant  of  the  protection  which 
the  law  afforded  him,  he  should  hold  that  he  was  not  bound  to  it. 
If  therefore  the  jury  should  be  of  opinion  that  the  facts  were  that 
this  promise  was  so  obtained,  he  should  direct  them  to  find  for  the 
defendant."  But,  as  no  evidence  was  given,  nor  question  made,  con- 
cerning the  defendant's  knowledge  of  his  rights,  it  is  manifest  that 
the  only  adjudged  point  in  the  case  was,  that  his  promise  was  made 
under  duress — threats  of  unlawful  imprisonment — and  that  he  might 
avoid  it  for  that  reason. 

Even  if  it  had  been  adjudged  that  knowledge  of  an  infant's 
rights  was  necessary  to  the  ratification  of  his  contracts  after  he  comes 
of  age,  such  judgment  would  have  been  virtually  overruled  by  the 
numerous  cases  decided  since,  in  which  the  requisites  of  a  ratifica- 
tion have  been  judicially  stated  without  mention  of  such  knowledge. 
And  if  such  knowledge  be  necessary  to  the  ratification  of  an  infant's 
contract,  by  a  new  promise  after  coming  of  age,  why  is  it  not  neces- 
sary in  those  cases  of  ratification,  not  by  promise,  but  by  acts  done 
or  omitted?    We  see  no  difference  in  principle  between  the  cases. 

12.     Mere  Acknowledgment  Not  Ratification. 

Hale  V.  Gerrish.  8  N.  H.  3/4. 

Gerrish  owed  Hale  money  for  goods  bought  in  Hale's  store 
while  Gerrish  was  an  infant.  After  Gerrish  came  of  age,  Hale 
asked  him  to  sign  a  note  for  the  amount.  Gerrish  acknowledged 
he  owed  the  debt. 

Held,  that  a  mere  acknowledgment  is  not  sufficient  ratification. 

UpJiam,  J. 

The  plaintiff  asked  the  defendant  "if  he  did  not  owe  the 
debt?"  The  defendant  replied  "that  he  did,  and  that  the  plaintiff 
would  get  his  pay" ;  and  added,  "I  suppose  this  is  all  you  want." 
He  further  said,  that  he  had  made  arrangements  to  pay  all  his  small 
debts  before  he  went  to  New  York. 

The  rule  in  this  case  is  different  from  that  where  the  statute 
of  limitations  is  pleaded.  An  acknowledgment  of  a  subsisting  debt, 
where  a  claim  has  been  barred  by  the  statute  of  limitations,  furnishes 
evidence,  unless  explained  or  qualified,  from  which  a  new  promise 
may  be  implied;  but  the  promise  of  an  infant  cannot  be  revived 
so  as  to  sustain  an  action,  unless  there  be  an  express  confirmation 
or  ratification,  after  he  comes  of  age.     This  ratification  must  either 


FORMATION    OF    CONTRACTS  99 

be  a  direct  promise,  as  by  saying,  "I  ratify  and  confirm,"  or  "I 
agree  to  pay  the  debt,"  or  by  positive  acts  of  the  infant  after  he  has 
been  of  age  a  reasonable  time,  in  favor  of  his  contract,  w^hich  are  of 
a  character  to  constitute  as  perfect  evidence  of  a  ratification,  as  an 
express   and  unequivocal  promise. 

In  [Ford  v.  Phillips]  i  Pick.  202,  the  declaration  of  the  de- 
fendant after  he  had  become  of  age,  was  "that  he  owed  the  plaintiff, 
but  was  unable  to  pay  him;  he  would  endeavor,  however,  to  get 
his  brother  to  be  bound  with  him."  It  was  holden  that  this  did  not 
amount  to  a  renewal  of  the  promise.  The  declaration,  in  this  case, 
that  the  defendant  "owed  the  debt,  and  that  the  plaintiff  would  get 
his  pay,"  seems  to  go  no  further. 

13.    Statutory  Requirement  of  Written  Ratification. 

Lamkin  &  Foster  v.  LeDoux.  loi  Me.  581. 

Lamkin  &  Foster  sold  boots  and  shoes  to  LeDoux,  a  minor, 
who,  as  a  retail  trader,  sold  part  of  the  merchandise  before  he 
came  of  age.  The  rest  he  continued  to  sell  for  some  time  after 
coming  of  age.  Lamkin  &  Foster  bring  an  action  to  secure  pay- 
ment for  the  goods. 

Held,  that  under  the  Maine  statute  ratification  must  be  in 
writing. 

Emery,  J.. 

Unfortunately  for  the  plantiffs  the  promise  or  contract  to 
pay  was  made  by  the  defendant  while  a  minor.  Even  at  common 
law  a  minor's  contract  was  not  enforceable  unless  ratified  by  him 
after  coming  of  age.  Our  statute  goes  further  and  makes  such 
contract  unenforceable  by  action  unless  it  is  ratified  in  writing  by 
the  maker  after  coming  of  age.  The  defendant's  conduct  after 
coming  of  age  may  have  shown  a  sufficient  ratification  at  common 
law,  but  there  was  no  ratification  in  writing,  and  hence  the  statute 
bars  the  action.  If  there  be  any  doubt  that  such  is  the  effect  of  the 
statute  upon  this  action,  we  think  it  removable  by  a  little  study  of 
the  language  of  the  statute  which  is  as  follows :  "No  action  shall 
be  maintained  on  any  contract  made  by  a  minor  unless  he,  or  some 
person  lawfully  authorized,  ratified  it  in  writing  after  he  arrived 
at  the  age  of  twenty-one  years,  except  for  necessaries,  or  real  estate 
of  which  he  has  received  the  title  and  retains  the  benefit."  The 
prohibition  is  absolute.  The  statute  does  not  impose  any  conditions  to 
be  complied  with  before  the  defendant  can  have  the  shelter  of  the 
statute.  It  does  not  require  him,  before  or  afterward,  to  return  the 
consideration  as  a  condition. 

The  only  two  exceptions  named  in  the  statute  also  show  its  ap- 
plication to  this  case.  The  statute  provides  that  it  shall  not  apply 
to   a   contract  made   by  a   minor    (i)    for   necessaries,   or    (2)    for 


lOO  COMMERCIAL    LAW    CASES 

"real  estate  of  which  he  has  received  the  title  and  retains  the 
benefit."  It  seems  a  necessary  inference  that  the  statute  does  apply 
to  a  contract  made  for  other  kinds  of  property  (not  necessaries 
nor  real  estate)  "of  which  he  has  received  the  title  and  retains  the 
benefit."  The  rule  is  stated  and  the  exceptions  are  stated.  The 
contract  in  this  case  is  not  within  the  exceptions.  It  is  therefore 
within  the  rule  of  the  statute. 

14.     Appointment  of  Agent  by  Infant. 

CoiirsoUe  v.  IVeyerhauscr.  6p  Minn.  ^28. 

Coursolle,  a  minor  who  owned  land,  executed  a  power  of  at- 
torney to  Dorr  to  sell  it.  Dorr  sold  the  property  to  Brown,  under 
whom  the  defendants  claim.  After  coming  of  age,  Coursolle 
agreed  to  stand  by  the  transaction  and  ratified  it  so  far  as  he  was 
able.  He  now  seeks  to  disaffirm  the  deed  on  the  ground  that 
his  appointment  of  an  agent  to  sell  land  was  void. 

Held,  that  an  infant's  appointment  of  an  agent  to  convey  land 
is  voidable,  not  void,  and  that  ratification  affirms  the  contract. 

Mitchell,  J. 

The  rule  is  that  the  act  to  be  ratified  must  be  voidable  merely, 
and  not  absolutely  void;  and  the  question  [is]  whether  the  act  of  a 
minor  in  appointing  an  agent  or  attorney  is  wholly  void,  or  merely 
voidable.  Formerly  the  acts  and  contracts  of  infants  were  held 
either  void,  or  merely  voidable,  depending  on  whether  they  were 
necessarily  prejudicial  to  their  interests,  or  were  or  might  be  benefi- 
cial to  them.  This  threw  upon  the  courts  the  burden  of  deciding 
in  each  particular  case  whether  the  act  in  question  was  necessarily 
prejudicial  to  the  infant.  Latterly  the  courts  have  refused  to  take 
this  responsibility,  on  the  ground  that,  if  the  infant  wished  to  de- 
termine the  question  for  himself  on  arriving  at  his  majority,  he 
should  be  allowed  to  do  so,  and  that  he  is  sufficiently  protected  by 
his  right  of  avoidance.  Hence  the  almost  universal  modern  doctrine 
is  that  all  the  acts  and  contracts  of  an  infant  are  merely  voidable. 
Upon  this  rule  there  seems  to  have  been  ingrafted  the  exception 
that  the  act  of  an  infant  in  appointing  an  agent  or  attorney,  and 
consequently  all  acts  and  contracts  of  the  agent  or  attorney  under 
such  appointment,  are  absolutely  void.  This  exception  does  not 
seem  to  be  founded  on  any  sound  principle,  and  all  the  text-writers 
and  courts  who  have  discussed  the  subject  have,  so  far  as  we  can 
discover,  conceded  such  to  be  the   fact. 

On  principle,  we  think  the  power  of  attorney  of  an  infant,  and 
the  acts  and  contracts  made  under  it,  should  stand  on  the  same  foot- 
ing as  any  other  act  or  contract,  and  should  be  considered  voidable 
in  the  same  manner  as  his  personal  acts  and  contracts  are  considered 
voidable.     If  the  conveyance  of  land  by  an  infant  personally,  who 


FORMATION    OF    CON'TRACTS  1 01 

is  of  imperfect  capacity,  is  only  voidable,  as  is  the  law,  it  is  difficult 
to  see  why  his  conveyance  made  through  an  attorney  of  perfect 
capacity  should  be  held  absolutely  void.  It  is  a  noticeable  fact  that 
nearly  all  the  old  cases  cited  in  support  of  this  exception  to  the 
general  rule  are  cases  of  technical  warrants  of  attorney  to  appear 
in  court  and  confess  judgment.  In  these  cases  the  courts  hold  that 
they  would  always  set  aside  the  judgment  at  the  instance  of  the 
infant,  but  we  do  not  find  that  any  of  them  go  as  far  as  to  hold 
that  the  judgment  is  good  for  no  purpose  and  at  no  time. 

The  courts  have  from  time  to  time  made  so  many  exceptions  to 
the  exception  itself  that  there  seems  to  be  very  little  left  of  it, 
unless  it  be  in  cases  of  powers  of  attorney  required  to  be  under 
seal,  and  warrants  of  attorney  to  appear  and  confess  judgment  in 
court. 

Hence,  notwithstanding  numerous  general  statements  in  the 
books  to  the  contrary,  we  feel  at  liberty  to  hold,  in  accordance  with 
what  we  deem  sound  principle,  that  the  power  of  attorney  from 
plaintiff  to  Dorr,  and  the  deed  to  Brown  under  that  power,  were 
not  absolutely  void  because  of  plaintiff's  infancy,  but  merely  void- 
able, and  that  they  were  ratified  by  him  after  attaining  his  majority. 

15.    Infant's  Liability  for  Tort  Distinguished. 

Slay  ton  v.  Barry.  i/'§  Mass.  5/j. 

Barry  fraudulently  represented  to  the  plaintifif,  Slayton,  that 
he  was  of  age,  and  thereby  secured  the  delivery  of  goods.  Slayton 
now  sues  him  in  tort,  as  he  cannot  prevail  in  an  action  of  contract 
on  account  of  Barry's  minority. 

Held,  that  an  action  for  tort  against  an  infant  cannot  be  main- 
tained if  the  wrong  arises  out  of  contractual  HabiHty. 

Morton,  J. 

The  general  rule  is,  of  course,  that  infants  are  liable  for 
their  torts.  But  the  rule  is  not  an  unlimited  one,  but  is  to  be  applied 
with  due  regard  to  the  other  equally  well  settled  rule  that,  with 
certain  exceptions,  they  are  not  liable  on  their  contracts;  and  the 
dominant  consideration  is  not  that  of  liability  for  their  torts  but  of 
protection  from  their  contracts.  The  true  rule  seems  to  us  to  be, 
if  the  fraud  is  directly  connected  with  the  contract  and  is  the  means 
of  effecting  it,  and  parcel  of  the  same  transaction,  then  the  infant 
will  not  be  liable  in  tort.  The  fraudulent  act,  to  charge  him  (the 
infant)  must  be  wholly  tortious;  and  a  matter  arising  ex  contractu, 
though  infected  with  fraud,  cannot  be  changed  into  a  tort  in  order 
to  charge  the  infant  in  trover,  or  case,  by  a  change  in  the  form  of 
the  action.  In  the  present  case  it  seems  to  us  that  the  fraud  on  which 
the  plaintiff  relies  was  part  and  parcel  of  the  contract  and  directly 
connected  with  it.     The  plaintiff  cannot  maintain  his  action  without 


102  COMMERCIAL    LAW    CASES 

showing  that  there  was  a  contract,  which  he  was  induced  to  enter 
into  by  the  defendant's  fraudulent  representations  in  regard  to  his 
capacity  to  contract,  and  that  pursuant  to  that  contract  there  was 
a  sale  and  delivery  of  the  goods  in  question. 


B.     Contracts  of  Insane  Persons. 

1.  What  Constitutes  Inability  to  Contract. 

Meigs  v.  Dexter,  ijs  Mass.  2iy. 

Dexter  claims  title  to  property  under  a  deed  from  Hall.  The 
question  arises  whether  or  not  the  deed  to  him  is  valid,  there  being 
doubt  as  to  the  sanity  of  Hall. 

Held,  that  in  order  to  avoid  a  contract,  the  insanity  must  be  the 
direct  cause  of  the  making  of  the  contract. 

Knou'lton,  J. 

[The  court  cited  with  approval  the  charge  of  the  judge  in  the 
lower  court,  which  was  in  part  as  follows :] 

A  person  may  have  an  insane  delusion,  I  think,  on  one  subject, 
as  on  the  subject  of  religion,  of  politics  even, — to  make  it  a  little 
more  practical, — and  yet  not  be  insane  on  other  subjects,  and  have 
good  mental  capacity  to  do  business.  The  question  is  whether  that 
insane  delusion,  if  a  person  has  it,  is  a  moving  cause  to  some  act 
which  would  not  have  been  done  except  for  the  delusion,  and  which 
renders  a  person  of  unsound  mind  in  respect  to  that  thing.  As  I 
say,  people  may  have  notions  on  religion  and  politics  that  others 
think  are  insane,  delusive ;  but  that  does  not  make  them  so,  and 
that  does  not  render  all  their  business  acts  void.  I  dare  say  you 
may  know  men  you  think  are  deluded  on  some  subjects,  and  yet  they 
may  be  good  business  men  perhaps.  If  the  act  is  not  inspired,  moved 
by  that  particular  delusion,  it  does  not  affect  their  transactions,  nor 
would  it  affect  a  deed. 

2.  Liability  of  Insane  Persons  for  Necessaries. 

Sceva  V.  True.  5J  N.  H.  62/. 

Sceva  sues  Fanny  True,  who  is  insane  and  confined  in  an  insane 
asylum,  for  necessaries  furnished  for  her  support.  Sceva  had  for 
some  time  taken  charge  of  the  defendant's  property,  and  had  sup- 
ported her  in  part  from  its  proceeds. 

Held,  that  an  insane  person  is  liable  for  necessaries  regardless 
of  capacity  to  contract. 


FORMATION   OF   CONTRACTS  IO3 

Ladd,  J. 

An  insane  person,  an  idiot,  or  a  person  utterly  bereft  of  all 
sense  and  reason  by  the  sudden  stroke  of  accident  or  disease,  may 
be  held  liable,  in  assumpsit,  for  necessaries  furnished  to  him  in 
good  faith  while  in  that  unfortunate  and  helpless  condition.  And 
the  reasons  upon  which  this  rests  are  too  broad,  as  well  as  too 
sensible  and  humane,  to  be  overborne  by  any  deductions  which 
a  refined  logic  may  make  from  the  circumstance  that  in  such  cases 
there  can  be  no  contract  or  promise  in  fact, — no  meeting  of  the 
minds  of  the  parties.  The  cases  put  it  on  the  ground  of  an  implied 
contract ;  and  by  this  is  not  meant  an  actual  contract, — that  is,  an 
actual  meeting  of  the  minds  of  the  parties,  an  actual,  mutual  under- 
standing, to  be  inferred  from  language,  acts,  and  circumstances, 
by  the  jury — but  a  contract  and  promise,  said  to  be  implied  by  the 
law,  where,  in  point  of  fact,  there  was  no  contract,  no  mutual 
understanding,  and  so  no  promise.  The  defendant's  counsel  says  it  is 
usurpation  for  the  court  to  hold,  as  matter  of  law,  that  there  is  a 
contract  and  a  promise,  when  all  the  evidence  in  the  case  shows 
that  there  was  not  a  contract,  nor  the  semblance  of  one.  It  is 
doubtless  a  legal  fiction,  invented  and  used  for  the  sake  of  the 
remedy.  If  it  was  originally  usurpation,  certainly  it  has  now  become 
very  inveterate,  and  firmly  fixed  in  the  body  of  the  law. 

It  by  no  means  follows  that  this  plaintiff  is  entitled  to  recover. 
In  the  first  place,  it  must  appear  that  the  necessaries  furnished  to 
the  defendant  were  furnished  in  good  faith,  and  with  no  purpose 
to  take  advantage  of  her  unfortunate  situation.  And  upon  this 
question,  the  great  length  of  time  which  was  allowed  to  pass  without 
procuring  the  appointment  of  a  guardian  for  her  is  a  fact  to  which 
the  jury  would  undoubtedly  attach  much  weight.  Its  significance 
and  importance  must,  of  course,  depend  very  much  on  the  circum- 
stances under  which  the  delay  and  omission  occurred,  all  of  which 
will  be  for  the  jury  to  consider  upon  the  question  whether  every- 
thing was  done  in  good  faith  towards  the  defendant,  and  with  an 
expectation  on  the  part  of  the  plaintiff  that  he  was  to  be  paid. 
Again:  the  jury  are  to  consider  whether  the  support  for  which  the 
plaintiff  now  seeks  to  recover  was  not  furnished  as  a  gratuity,  with 
no  expectation  or  intention  that  it  should  be  paid  for,  except  so  far 
as  compensation  might  be  derived  from  the  use  of  the  defendant's 
share  of  the  farm.  And,  upon  this  point,  the  relationship  existing 
between  the  parties,  the  length  of  the  time  the  defendant  was  there 
in  the  family  without  any  move  on  the  part  of  Enoch  F.  Sceva 
to  charge  her  or  her  estate,  the  absence  (if  such  is  the  fact)  of 
an  account  kept  by  him  wherein  she  was  charged  with  her  support, 
and  credited  for  the  use  and  occupation  of  the  land, — in  short,  all 
the  facts  and  circumstances  of  her  residence  with  the  family  that 
tend  to  show  the  intention  or  expectation  of  Enoch  F.  Sceva  with 
respect  to  being  paid  for  her  support,  are  for  the  jury.  If  these 
services    were    rendered   and   this    support    furnished,    with    no   ex- 


I04  COMMERCIAL    LAW    CASES 

pectation  on  the  part  of  Enoch  F.  Sceva  that  he  was  to  charge  or 
be  paid  therefor,  this  suit  cannot  be  maintained;  for  then  it  must 
be  regarded  substantially  in  the  light  of  a  gift  actually  accepted 
and  appropriated  by  the  defendant,  without  reference  to  her  capacity 
to  make  a  contract,  or  even  to  signify  her  acceptance  by  any  mental 
assent. 


3.     Knowledge  of  Insanity  by  Other  Party  Immaterial. 

Seaver  v.  Phelps.  11  Pick.  (Mass.)  304. 

Seaver  seeks  to  recover  the  value  of  a  promissory  note  pledged 
to  Phelps,  at  a  time  when  he,  Seaver,  was  insane. 

Held,  that  an  insane  person  may  avoid  his  contract  regardless 
of  the  belief  of  the  other  party  that  he  w^as  sane. 

Wilde,  /.. 

The  general  doctrine  that  the  contracts  of  idiots  and  insane 
persons  are  not  binding  in  law  or  equity,  is  not  denied.  Being 
bereft  of  reason  and  understanding,  they  are  considered  incapable 
of  assenting  to  a  contract,  or  of  doing  any  other  valid  act.  And 
although  their  contracts  are  not  generally  absolutely  void,  but  only 
voidable,  the  law  takes  care  effectually  and  fully  to  protect  their 
interests. 

We  are  to  consider  the  plaintiff  as  in  a  state  of  insanity  at 
the  time  he  pledged  his  note  to  the  defendant;  and  this  being  ad- 
mitted, we  think  it  cannot  avail  him  as  a  legal  defense  to  show 
that  he  was  ignorant  of  the  fact,  and  practised  no  imposition.  The 
fairness  of  the  defendant's  conduct  cannot  supply  the  plaintiff's  want 
of  capacity. 

Now  no  one  would,  we  apprehend,  undertake  to  maintain  that 
the  plaintiff  would  have  been  bound,  if  he  had  been  a  minor  when 
he  pledged  the  note.  It  does  not  appear  to  have  been  pledged  for 
necessaries;  and  all  contracts  of  infants  are  either  void  or  voidable 
unless  made  for  education  or  necessaries  suitable  to  their  degree 
and  condition.  And  even  if  the  note  had  been  pledged  as  security 
for  the  payment  of  necessaries,  it  would  not  have  been  binding  if 
the  plaintiff  had  been  an  infant.  For  a  pledge  is  in  the  nature  of 
a  penalty,  and  may  be  forfeited,  and  can  be  of  no  advantage  to  the 
infant,  and  therefore  shall  not  bind  him. 

We  are  aware  that  insanity  is  sometimes  hard  to  detect,  and 
that  persons  dealing  with  the  insane  may  be  subjected  to  loss  and 
difficulty;  but  so  they  may  be  by  dealing  with  minors.  The  danger, 
however,  cannot  be  great,  and  seems  to  furnish  no  sufficient  cause 
for  modifying  the  rules  of  law  in  relation  to  insane  people,  if  we 
had  any  power  and  authority  to  do  so;  which  we  have  not. 


FORMATION    OF    CONTRACTS  IO5 

4.     Necessity  of  Return  of  Consideration  on  Disaffirmance. 
(Majority  Rule.) 

McCarthy  v.  Bowling  Green  Storage  &  Van  Co.   182  App. 
Div.  (N.  Y.)   18. 

McCarthy  bought  goods  at  an  auction  conducted  by  the  defen- 
dant. McCarthy,  at  that  time,  was  of  unsound  mind,  but  had 
not  been  judicially  declared  insane.  A  committee  appointed  under 
the  New  York  statute  to  conserve  his  estate  seeks  to  avoid  the 
purchase. 

Held,  that  a  contract  made  by  an  insane  person  with  another 
party  who  has  acted  in  good  faith,  cannot  be  rescinded  unless  the 
other  party  can  be  placed  in  statu  quo. 

Laughlin,  J. 

Where  a  person,  pursuant  to  law,  is  duly  adjudged  insane  or 
otherwise  incompetent  and  a  committee  has  been  appointed,  the 
world  is  chargeable  with  notice,  and  every  contract  thereafter  made 
with  him  is  absolutely  void ;  but  contracts  made  by  an  incompetent 
person  before  such  an  adjudication  and  appointment  are  voidable 
only,  and  at  his  election  on  recovering  from  the  disability,  or  at  the 
election  of  his  committee  or  personal  representatives  or  heirs,  and 
on  such  election  being  made,  an  action  either  at  law  or  in  equity 
may  be  brought  or  defended  for  the  restoration  or  retention  of  his 
property.  It  does  not  appear  to  have  been  authoritatively  decided 
in  this  jurisdiction  whether  on  electing  to  avoid  such  a  voidable 
contract,  the  consideration  received  by  the  incompetent  must  be 
tendered  back.  Contracts  of  infants  and  incompetents  are  voidable 
for  their  protection,  in  the  event  that  the  contracts  are  not  deemed 
to  be  beneficial  to  them.  In  both  classes  of  cases  the  right  to  elect 
to  avoid  the  contract  is  based  on  the  incapacity  to  contract.  It  is 
well  settled  that  the  right  of  an  infant  to  avoid  or  rescind  contracts 
made  during  his  minority  does  not  depend  on  his  ability  to  restore 
the  consideration,  or  otherwise  make  restitution  to  the  other  party 
with  whom  he  contracted,  or  whether  such  party  can  be  placed  in 
statu  quo;  but  to  the  extent  that  he  still  has  the  consideration  the 
other  party  becomes  entitled  thereto.  It  is  said  in  support  of  that 
doctrine  that  the  right  to  avoid  or  to  rescind  would  be  of  but  little 
value  to  the  infant,  if  he  were  required  to  make  full  restitution,  for 
that  would  afford  him  no  protection  in  the  event  that,  through  lack 
of  mental  capacity,  he  had  lost  or  squandered  the  consideration. 
The  same  reasons  would  apply  to  contracts  made  by  incompetents ; 
but  in  the  one  case  the  other  party  would  ordinarily  know  whether 
he  was  dealing  with  an  infant  or  an  adult,  whereas  there  might  be 
no  ground  for  the  slightest  suspicion  of  incompetency.  It  would 
seem  that  one   contracting   with   an   infant  with  knowledge,   actual 


I06  COMMERCIAL    LAW    CASES 

or  imputed  by  law  of  his  infancy  and  contracting  with  an  incom- 
petent knowing  him  to  be  incompetent  should  be  held  to  have  risked 
rescission  without  restitution ;  but  where  one  in  good  faith  contracts 
with  an  incompetent,  not  so  adjudged,  without  notice  or  knowledge 
of  his  disability,  it  may  well  be  argued  that  the  exercise  of  the 
right  of  rescission  will  not  be  permitted,  where  full  restoration  can- 
not be  made  for  the  reason  that  thereby  an  undue  burden  would  be 
cast  on  honest  traders,  who  would  be  helpless  against  such  conse- 
quences, and  that  it  would  be  more  equitable  to  regard  the  loss  caused 
by  the  affliction  as  the  misfortune  of  the  afflicted  one.  Although 
everyone  is  chargeable  with  constructive  notice  where  there  has  been 
an  adjudication  of  incompetency  it  is  evident  one  might  innocently 
without  actual  notice  contract  with  such  a  person ;  but  the  risks  of 
loss  from  such  contracts  would  be  slight  for  ordinarily  the  incom- 
petent is  restrained  or  attended.  A  distinction  is,  therefore,  made 
between  the  avoidance  or  rescission  of  contracts  made  by  infants  and 
those  made  by  incompetents.  With  respect  to  the  latter  the  rule 
is  that  if  the  contract  was  fair  and  for  the  benefit  of  the  incom- 
petent and  made  in  good  faith  and  without  notice  of  his  incapacity 
and  the  other  party  cannot  be  placed  in  statu  quo,  these  facts  con- 
stitute an  equitable  defense  to  the  avoidance  or  rescission,  to  be 
pleaded  and  proved  as  such. 

5.     a.     Necessity  of  Return  of  Consideration  on  Disaffirmance. 
(Minority  Rule.) 

b.    Ratification. 

Hovey  v.  Hobson.  55  Me.  451. 

Neal,  an  insane  person,  conveyed  lands  to  Crocker,  through 
whom  Hobson  holds.  After  Neal  died,  Lydia  Dennett,  his  sole 
heiress,  conveyed  the  property  to  Hovey.  Hovey  seeks  to  avoid 
the  deed  to  Crocker  on  the  ground  that  Neal  was  insane. 

Held,  that  ignorance  of  insanity  of  the  grantor  is  no  defense 
to  a  purchaser  without  notice. 

Appleton,  C.  J.' 

The  questions  arise,  (i)  as  to  rights  of  an  insane  man  when 
restored  to  sanity,  or  of  his  heirs  to  avoid,  as  against  his  immediate 
grantee,  his  deed  executed  and  delivered  when  insane;  and,  (2) 
as  to  the  rights  of  those  deriving  a  title  in  good  faith,  without  notice, 
and  for  a  valid  consideration  from  such  grantee. 

The  deed  of  an  insane  man  not  under  guardianship  is  not  void 
but  voidable,  and  may  be  confirmed  by  him  if  afterwards  sane,  or 
by  his  heirs.  If  under  guardianship,  the  deed  is  absolutely  void. 
The  right  of  avoiding  a  contract  exists,  notwithstanding  the  person 


FORMATION    OF    CONTRACTS  IO7 

with  whom  the  insane  man  contracted  was  not  apprized  of  and  had 
no  reason  to  suspect  the  existence  of  such  insanity,  and  did  not 
overreach  him  by  any  fraud  or  deception.  So  an  infant  may  avoid 
his  contract,  though  the  person  deahng  with  him  supposed  him 
of  age ;  or  even  when  he  fraudulently  and  falsely  represented  him- 
self of  age.  The  deed  of  an  insane  man  being  voidable,  he  may 
ratify  it  after  he  becomes  sane,  or  his  heirs  after  his  decease.  An 
insane  person  or  his  guardian  may  bring  an  action  to  recover  land 
of  which  a  deed  was  made  by  him  while  insane,  without  first  restor- 
ing the  consideration  to  the  grantee,  the  deed  not  having  since  been 
ratified  nor  confirmed.  In  this  case,  the  remark  of  Shaw,  C.  J., 
that  if  "the  unfortunate  person  of  unsound  mind,  coming  to  the 
full  possession  of  his  mental  faculties,  desires  to  relieve  himself 
from  a  conveyance  made  during  his  incapacity,  he  must  first  restore 
the  price,  if  paid,  or  surrender  the  contract  for  it,  if  unpaid,"  is 
limited  and  restricted  by  Thomas,  J.,  "to  the  case  of  a  grantor 
having  in  his  possession  the  notes  which  were  the  consideration  of 
the  deed  and  restored  to  the  full  possession  of  his  mind."  In  the 
deed  or  other  contract  of  an  insane  man  the  consenting  mind  is 
wanting.  "To  say  that  an  insane  man,"  observes  Thomas,  J.,  "before 
he  can  avoid  a  voidable  deed,  must  first  put  the  grantee  in  statu 
quo,  would  be  to  say,  in  effect,  that,  in  a  large  majority  of  cases, 
his  deed  shall  not  be  avoided  at  all.  The  more  insane  the  grantor 
was  when  the  bargain  was  made,  the  less  likely  will  he  be  to  retain 
the  fruits  of  his  bargain,  so  as  to  be  able  to  make  restitution.  It 
would  be  absurd  to  annul  the  bargain  for  the  mental  incompetency 
of  a  party,  and  yet  to  require  of  him  to  retain  and  manage  the 
proceeds  of  his  sale  so  wisely  and  discreetly  that  they  shall  be 
forthcoming,  when  with  restored  intellect  he  shall  seek  its  annul- 
ment." Lunatics  and  persons  non  compos  are  not  bound  by  their 
contracts,  though  no  fraud  nor  imposition  has  been  practised  on 
them. 

As  the  deed  of  an  insane  man  is  voidable  only,  it  follows  that 
it  is  capable  of  subsequent  ratification  by  the  grantor  if  he  be 
restored  to  reason,  or  by  his  heirs.  The  retention  of  the  notes 
after  such  restoration  and  receiving  payments  on  them,  would  be 
evidence  of  such  ratification.  In  the  analogous  case  of  infancy, 
it  seems  that  there  may  be  an  acquiescence  by  the  grantor  under 
such  circumstances  as  would  amount  to  an  equitable  estoppel.  It 
was  held  that  an  infant's  acquiescence  in  a  conveyance  for  four 
years  after  age  and  seeing  the  property  extensively  improved,  would 
be  a  confirmation.  Though  mere  lapse  of  time  will  not  amount 
to  a  confirmation,  unless  continued  for  twenty  years,  yet  in  connec- 
tion with  other  circumstances  it  may  amount  to  a  ratification. 
Whether,  in  the  case  before  us,  the  deed  of  Stephen  Neal  has  been 
affirmed  by  the  reception,  by  those  authorized,  of  the  purchase 
money  for  the  land,  or  the  heir  at  law,  after  the  death  of  her 
husband  or  the  passage  of  the  laws  in  relation  to  married  women, 
is   equitably   estopped  by   her   omission   to   act   under   circumstances 


I08  COMMERCIAL    LAW    CASES 

which  required  action  on  her  part,  are  questions  which  at  this  time 
are  not  pressing  for  consideration. 

It  is  insisted,  even  if  the  deed  of  Neal  might  have  been  avoided 
as  between  the  original  grantor  and  grantee,  that  this  right  of 
avoidance  ceases  when  the  title  has  passed  into  the  hands  of  third 
persons  in  good  faith,  for  an  adequate  consideration,  and  ignorant 
of  any  facts  tending  to  impeach  such  title. 

It  is  apparent  that  the  protection  of  the  insane  and  the  idiotic 
will  be  materially  diminished,  if  the  heirs  cannot  follow  the  property 
conveyed,  but  are  limited  in  their  right  of  avoidance  to  the  im- 
mediate grantee  of  such  insane  or  idiotic  person. 

The  principles  applicable  to  deeds  voidable  for  the  infancy 
of  the  grantor  are  equally  applicable  where  the  grantor  is  insane. 
When  a  man  is  defrauded,  he  may,  as  against  his  grantee,  avoid  his 
deed,  but  not  against  those  deriving  in  good  faith  and  for  an  adequate 
consideration  a  title  from  such  grantee.  He  has  the  ability  to 
convey  an  indefeasible  title — and  he  does  convey  such  title  to  all 
bona  fide  purchasers  from  his  grantee.  The  insane  man  has  not  the 
power  to  convey  such  indefeasible  title.  This  incapacity  inheres 
in  all  titles  derived  from  him.  The  grantee,  whose  title  is  thus  de- 
rived, must  rely  on  the  covenants  of  his  deed.  He  risks  the  capacity 
to  convey  of  all  through  whom  his  title  has  passed.  The  right  of 
infants  and  of  the  insane  alike  to  avoid  their  contracts  is  an  absolute 
and  paramount  right,  superior  to  all  equities  of  other  persons,  and 
may  be  exercised  against  bona  tide  purchasers  from  the  grantee. 


C.     Contracts  of  Married  Women. 

I.     Common  Law  Disability. 

Robinson  v.  Reynolds,  i  Aikcns  (Vt.)  1^4. 

Robinson  brings  a  common  law  action  against  Mrs.  Reynolds 
on  a  debt.  The  defense  is  that  as  she  was  a  married  woman  at  the 
time  she  incurred  the  debt,  she  was  incapable  of  contracting. 

Held,  that  at  common  law  a  married  woman  cannot  contract. 

Skinner,  C.  J. 

In  contemplation  of  law,  by  marriage,  the  existence  of  the 
wife  is  merged  in  that  of  the  husband.  And  it  is  a  general  principle, 
that  she  can,  during  coverture,  make  no  contracts  by  which  she  is 
bound ;  or  sue  or  be  sued  alone. 

To  this  rule  of  law,  that  a  married  woman  is  incapable  of 
suing,  or  being  sued,  without  her  husband,  there  are  excepted  cases; 
and  so  far  as  the  principles,  which  have  controlled  the  decisions 
in  such  cases  extend,  the  Court  feel  bound  to  recognize  them,  as 
the  law  here. 


FORMATION    OF    CONTRACTS  IO9 

Where  the  husband  is  accounted  in  law  civiliter  mortnus,  the 
wife  may  sue  or  be  sued  alone;  as  where  the  husband  is  exiled, 
banished  for  life,  or  has  abjured  the  realm.  So  too,  where  the  hus- 
band is  an  alien,  having  never  resided  in  the  government,  she  is 
capable  of  suing  or  being  sued  alone.  But  we  believe  there  is  no 
principle  of  law,  that  will  authorize  her  to  sue,  or  subject  her  to 
a  suit,  as  a  feme  sole,  where  the  husband  is  a  citizen  or  subject  of 
the  government,  on  account  of  her  having  a  separate  maintenance,  or 
of  his  temporary  absence. 

In  examining  the  cases  that  have  been  decided,  bearing  upon 
the  question  upon  which  a  decision  is  called  for  in  this  case,  it 
will  be  found,  that  although  there  are  some,  in  which  a  temporary 
absence  of  a  citizen  or  subject,  would  seem  to  have  been  a  ground 
for  considering  the  wife  as  a  feme  sole,  for  the  purposes  of  con- 
tracting, pleading,  and  being  impleaded;  yet  it  is  clearly  opposed 
by  the  current  of   authority. 

If  the  wife  was  not  liable  at  the  time  of  contracting,  lapse  of 
time  cannot  make  her  so.  Suppose  the  husband  should  return  while 
the  action  was  pending,  could  the  plaintiff  proceed  with  his  action 
and  imprison  the  wife?  In  the  event  of  the  return  of  the  husband, 
it  will  hardly  be  contended  that  property  acquired  by  the  wife  in 
his  absence,  would  be  beyond  his  control,  or  that  she  can  be  endowed. 
It  is  not  perceived  upon  what  principle  the  wife  for  some  purposes 
may  be  considered  as  feme  sole,  and  for  others  as  covert, 

2.     Contracts  Between  Husband  and  Wife. 

Lord  V.  Parker,  j  Allen  (Mass.)  12/. 

Suit  is  brought  by  Parker  on  a  note  of  J.  H.  Lord  &  Company, 
a  firm  of  which  two  partners  were  Lord  and  Mrs.  Lord.  Mrs. 
Lord  contends  that  she  could  not  legally  enter  into  a  contract  of 
partnership  with  her  husband. 

Held,  that  husband  and  wife  cannot  contract  with  each  other. 

Hoar,  J. 

The  question  is,  whether  it  is  in  the  power  of  a  married  woman, 
under  the  laws  of  Massachusetts,  to  form  a  copartnership  with  her 
husband  and  other  persons,  with  all  the  consequences  and  liabilities 
incident  to  that  relation  ?  If  she  has  this  power,  it  is  because  it  has 
been  expressly  conferred  by  statute.  The  Statute  of  1855  provides 
that  "any  woman  hereafter  married  may,  while  married,  bargain,  sell 
and  convey  her  real  and  personal  property,  and  enter  into  any  con- 
tract in  reference  to  the  same,  in  the  same  manner  as  if  she  were  sole." 

The  Statute  of  1857  provides  that  "any  married  woman  may, 
while  married,  bargain,  sell  and  convey  her  real  and  personal  prop- 
erty, which  may  now  be  her  sole  and  separate  property,  or  which 
may  hereafter  come  to  her  by  descent,  devise,  bequest  or  gift  of 


no  COMMERCIAL    LAW    CASES 

any  person  except  her  husband,  and  enter  into  any  contract  in  refer- 
ence to  the  same,  in  the  same  manner  as  if  she  were  sole." 

The  title  of  these  acts  is,  "An  Act,"  and  "An  act  in  addition  to  an 
act  to  protect  the  property  of  married  women."  Their  leading 
object  is  to  enable  married  women  to  acquire,  possess  and  manage 
property,  without  the  intervention  of  a  trustee,  free  from  the  inter- 
ference of  control,  and  without  liability  for  the  debts,  of  their  hus- 
bands. They  are  in  derogation  of  the  common  law,  and  certainly 
are  not  to  be  extended  by  construction.  And  we  cannot  perceive  in 
them  any  intention  to  confer  upon  a  married  woman  the  power  to 
make  any  contract  with  her  husband,  or  to  convey  to  him  any  prop- 
erty, or  receive  any  conveyance  from  him.  The  power  to  form  a 
copartnership  includes  the  power  to  create  a  community  of  property, 
with  a  joint  power  of  disposal,  and  a  mutual  liability  for  the  con- 
tracts and  acts  of  all  the  partners.  To  enter  into  a  partnership  in 
business  with  her  husband  would  subject  her  property  to  his  control 
in  a  manner  hardly  consistent  with  the  separation  which  it  is  the 
purpose  of  the  statute  to  secure,  and  might  subject  her  to  an  indefinite 
liability  for  his  engagements.  The  property  invested  in  such  an 
enterprise  would  cease  to  be  her  "sole  and  separate"  property.  The 
power  to  arrange  the  terms  of  such  a  contract  would  open  a  wide 
door  to  fraud  in  relation  to  the  property  of  the  husband.  The  property 
which  a  married  woman  may  acquire  and  dispose  of  by  Statute  1857 
includes  such  as  may  come  to  her  "by  gift  of  any  person  except  her 
husband,"  clearly  indicating  that  a  gift  from  him  was  not  to  be  rec- 
ognized as  creating  any  title  to  property  in  her. 


REALITY  OF  CONSENT. 

There  must  be  a  real  meeting  of  the  minds  of  the  parties  to  a 
contract.  This  implies  an  actual  consent  on  both  sides  in  order 
that  there  shall  be  an  enforceable  obligation.  Mistake,  misrepre- 
sentation, fraud,  duress,  and  undue  influence  may  constitute 
grounds  for  avoiding  a  contract. 

Mistake  occurs  when  the  parties  do  not  mean  the  same  thing 
or  when  one  or  both  form  untrue  conceptions  as  to  the  subject 
matter  of  the  agreement.  Mistake  on  the  part  of  one  party  will 
not  ordinarily  avoid  a  contract,  for  the  reason  that  a  man  is  to  be 
held  to  that  which  his  acts  indicate  to  be  his  intention,  rather  than 
to  a  secret  purpose  in  no  way  evidenced.  The  gist  of  a  mistake 
which  will  serve  as  basis  for  rescission  lies  in  a  faihire  of  the  minds 
•to  meet.  Tf  the  minds  have  really  met,  it  is  not  necessary  that 
either  of  the  parties  should  get  what  he  thinks  he  is  getting.  A 
mistake  as  to  the  nature  of  the  transaction,  a  mistake  as  to  the  iden- 
tity of  the  person   with  whom  the  contract   is  made  when   that 


FORMATION  OF  CONTRACTS  III 

identity  is  material,  and  a  mistake  as  to  the  subject  matter  of  the 
contract,  represent  the  only  cases  in  which  a  mistake  will  be 
ground  for  avoiding  a  contract.  Mistake  as  to  the  subject  matter 
for  this  purpose  is  to  be  limited  to  mistake  as  to  the  existence  or 
identity  of  the  subject  matter  and  mistake  as  to  the  nature  of  the 
promise,  which  mistake  is  known  to  the  other  party.  A  mistake 
of  law  will  not  justify  annulment,  unless  it  is  a  mistake  in  regard 
to  specific  rights  rather  than  to  the  operation  of  law  in  general. 
The  law  of  a  foreign  state,  by  which  is  meant  a  state  other  than 
the  forum,  is  for  this  purpose  considered  a  matter  of  fact,  not 
of  law. 

An  innocent  misrepresentation  will  not  serve  as  basis  for  avoid- 
ance at  law  unless  the  misrepresentation  is  itself  incorporated  as  a 
condition  of  the  contract.  In  equity,  and  in  jurisdictions  where  an 
equitable  defense  may  be  interposed  at  law,  relief  will  be  given 
when  the  contract  is  induced  by  an  innocent  misrepresentation 
intended  by  the  parties  to  be  a  vital  term  of  the  contract.  It  then 
ceases  to  be  a  mere  representation  and  becomes  either  an  induce- 
ment going  to  the  root  of  the  contract  and  as  such  justifying  the 
other  party  in  repudiation,  or  a  warranty,  an  independent,  collat- 
eral and  subsidiary  promise  which  if  untrue  entitles  the  other 
party  by  the  better  rule  at  common  law  to  damages  but  not  to 
repudiation.  Whenever  there  is  a  special  relationship  of  con- 
fidence between  the  parties,  as  between  trustee  and  beneficiary, 
principal  and  agent,  guardian  and  ward,  attorney  and  client,  or 
partners,  and  whenever  one  party  expressly  or  by  necessary  impli- 
cation of  circumstances  relies  upon  the  other  for  accurate  state- 
ments to  the  knowledge  of  that  other,  as  in  the  case  of  insurance, 
an  innocent  misrepresentation  by  the  party  in  whom  confidence  or 
upon  whom  reliance  is  placed  will  justify  the  other  party  in 
repudiating  the  contract  even  at  law. 

Fraud,  which  always  justifies  the  repudiation  of  a  contract, 
has  the  same  elements  as  an  action  of  tort  for  deceit.     It  involves : 

1.  A  misrepresentation  of  a  material  existing  fact,  which 
includes  concealment  when  there  is  a  duty  of  disclosure. 

2.  Knowledge  of  the  falsity  of  the  representation  by  the 
party  making  it,  which  includes  a  reckless  disregard  of 
truth  or   falsity. 

3.  An  intent  that  the  representation  shall  be  acted  upon  by 
the  other  party. 

4.  Action  in  reliance  upon  the  representation,  and 

5.  Damage,  which  in  the  case  of  a  contract  induced  by  fraud 
is  to  be  inferred  from  its  execution. 

Duress  and  undue  influence  operate  to  make  impossible  a  real 
consent  to  the  contract.     Duress  is  threatened  violence  or  impris- 


112  COMMERCIAL    LAW    CASES 

onment  by  which  a  person  is  forced  to  enter  into  a  contract  against 
his  will.  It  must  be  inflicted  on  the  contracting  party  or  on  a 
near  relative.  It  must  induce  the  party  to  enter  into  the  contract 
and  it  must  prevent  the  exercise  of  the  free  will  of  the  party  so 
induced.  Under  modern  law,  detention  of  goods  may  constitute 
duress  sufficient  to  make  a  contract  voidable.  Undue  influence  is 
a  species  of  fraud,  an  abuse  of  confidence  by  one  in  a  trust  relation- 
ship or  in  authority,  by  taking  advantage  of  another's  weakness 
of  mind,  or  by  taking  an  oppressive  and  unfair  advantage  of  an- 
other's necessity  and  distress.  It  must  be  more  than  ordinary 
persuasion,  and  must  amount  to  a  dominion  over  the  will  of  the 
person  so  influenced  to  an  extent  that  destroys  his  free  agency. 

A.     Mistake. 

I.     No  Mistake  When  Minds  Meet. 

IVohurn  National  Bank  v.  Woods.  77  N.  H.  iy2. 

The  bank,  a  creditor  of  William  Woods,  seeks  to  set  aside 
a  sale  of  land  made  by  him  to  his  mother,  as  a  transfer  in  fraud  of 
creditors.  Woods  needed  money,  and  gave  a  deed  of  this  land  to 
his  mother  for  $1000,  which  he  in  good  faith  considered  to  be 
the  purchase  price  for  the  land,  but  which  his  mother  considered 
to  be  a  loan. 

Held,  that  there  was  no  mistake  which  would  justify  setting 
aside  the  conveyance. 

Peaslee,  /. ' 

A  contract  involves  what  is  called  a  meeting  of  the  minds  of 
the  parties.  But  this  does  not  mean  that  they  must  have  arrived 
at  a  common  mental  state  touching  the  matter  in  hand.  The  standard 
by  which  their  conduct  is  judged  and  their  rights  are  limited  is 
not  internal,  but  external.  In  the  absence  of  fraud  or  incapacity, 
the  question  is:  what  did  the  party  say  and  do?  The  making  of  a 
contract  does  not  depend  upon  the  state  of  the  parties'  minds;  it 
depends  on  their  overt  acts.  We  are  to  fix  the  person  with  such 
expressed  consequences  as  are  the  reasonable  result  of  his  volition. 

Where  a  concurring  intent  is  proved,  it  is  merely  a  short  way 
of  showing  that  by  conduct  mutually  intelligible  the  parties  have 
expressed  themselves  each  to  the  otlier.  But  when  the  intent  does 
not  concur,  it  is  immaterial.  Recourse  must  then  be  had  to  the  ex- 
ternal facts  from  which  intent  is  usually  judged.  It  must  be  shown 
by  the  words  and  acts  of  the  parties.  Cases  where  there  is  as  es- 
toppel form  a  large  part  of  all  that  arise.  The  statement  or  offer 
of  one  party,  acted  upon  by  the  other,  is  the  typical  case  of  making 
a  contract. 


FORMATION    OF    CONTRACTS  II3 

Evidence  of  intent  may  be  competent  in  certain  cases  as  proof 
of  what  was  in  fact  the  overt  conduct  of  the  party.  If  it  is  pos- 
sible to  reproduce  conversation  exactly,  yet  the  manner  may  often 
be  as  important.  It  may  be  incapable  of  reproduction,  and  some 
light  may  be  thrown  upon  it  by  showing  the  intent  with  which  the 
words  were  spoken.  But  after  this  evidence  is  admitted  the  final 
question  to  be  decided  is  not  what  the  secret  intent  was,  but  what 
intent  was  expressed  by  the  overt  conduct,  taken  as  a  whole. 

It  is  elementary  in  the  law  governing  contracts  of  sale  and 
all  other  contracts,  that  the  agreement  is  to  be  ascertained  ex- 
clusively from  the  conduct  of  the  parties  and  the  language  used 
when  it  is  made,  as  applied  to  the  subject  matter  and  to  known 
usages.  The  assent  must  be  mutual,  and  the  union  of  minds  is  as- 
certained by  some  medium  of  communication.  A  proposal  is  made  by 
one  party  and  is  acceded  to  by  the  other  in  some  kind  of  language 
mutually  intelligible,  and  this  is  mutual  assent.  A  party  cannot 
escape  the  natural  and  reasonable  interpretation  which  must  be  put 
on  what  he  says  and  does,  by  showing  that  his  words  were  used  and 
his  acts  done  with  a  different  and  undisclosed  intention.  It  is 
not  the  secret  purpose,  but  the  expressed  intention,  which  must 
govern  in  the  absence  of  fraud  and  mutual  mistake.  A  party  is 
estopped  to  deny  that  the  intention  communicated  to  the  other  side 
was  his  real  intention. 

The  facts  found  show  that  there  was  a  contract  between  these 
parties.  The  vendor  proposed  to  sell  at  a  price  named,  executed 
a  deed,  and  delivered  it  to  the  vendee's  representative.  This  repre- 
sentative in  turn  explained  the  transaction  to  the  purchaser,  who  ex- 
pressed satisfaction  therewith,  paid  the  purchase  price,  and  had  the 
deed  recorded.  The  words  and  acts  of  the  parties  are  susceptible 
of  but  one  construction.  They  show  a  complete  agreement  and  a 
full  execution  of  the  contract.  The  effect  of  this  is  not  destroyed 
by  proof  that  one  party  misunderstood  the  legal  eft'ect  of  what  they 
said  and  did. 

The  finding  that  the  minds  of  the  parties  did  not  meet  is  ex- 
plained by  other  findings  accompanying  it.  The  meaning  is  that  there 
was  a  unilateral  mistake  as  to  the  effect  of  the  contract  which  had 
been  made.  If  this  could  ever  be  a  ground  for  affording  relief 
from  the  agreement  entered  into,  it  would  be  only  at  the  instance 
of  the  mistaken  party.  Such  a  situation  would  not  make  the  con- 
tract a  nullity.  At  most,  the  contract  could  only  be  treated  as  void- 
able, and  that  at  the  option  of  the  party  who  acted  upon  an  erroneous 
belief.  Until  that  party  saw  fit  to  take  action,  the  contract  would 
stand  like  any  other  where  the  element  of  mistake  did  not  exist. 
If  in  the  present  case  the  defendant  Adeline  could  avoid  the  contract, 
she  has  not  sought  to  do  so.  On  the  contrary,  after  she  was  informed 
of  her  error  she  elected  to  stand  on  the  contract  as  made.  This  elec- 
tion was  not  the  inception  of  her  title.     It  did  not  make  the  contract. 


114  COMMERCIAL   LAW    CASES 

The  contract  existed  from  the  time  she  first  expressed  her  assent  to 
it.  If  it  was  liable  to  be  avoided  by  her,  it  was  in  force  until  so 
avoided. 

2.  Failure  of  Minds  to  Meet. 

Kyle  V.  Kavanagh.  lo^  Moss.  55(5. 

Kyle  agreed  in  writing  to  sell  Kavanagh  certain  property  "in 
Waltham"  on  Prospect  Street.  Kavanagh  supposed  he  was  buying 
land  situated  on  another  Prospect  Street  in  the  same  city.  Kyle 
sues  on  the  contract. 

Held,  that  when  the  minds  of  the  parties  do  not  meet,  there 
is  no  contract. 

[The  judge,  at  the  commencement  of  his  charge,  instructed 
the  jury  that,  "if  the  defendant  was  negotiating  for  one  thing  and 
the  plaintiff  was  selling  another  thing,  and  if  their  minds  did  not 
agree  as  to  the  subject  matter  of  the  sale,  they  could  not  be  said 
to  have  agreed  and  to  have  made  a  contract" ;  and  furthermore, 
after  the  conclusion  of  his  charge  and  at  the  request  of  the  defen- 
dant, also  instructed  the  jury  that,  "if  the  plaintiff  or  the  defendant 
were  in  fact  mistaken  as  to  the  location  of  the  land,  it  was  a  good 
defense,  although  there  was  no  fraud  or  misrepresentation  on  the 
part  of  the  plaintiff,"  and  that  "mistake  alone,  if  proved,  was  a 
good  defense."] 

Morton,  J. 

The  instructions  given  were,  in  substance,  that,  if  the  de- 
fendant was  negotiating  for  one  thing  and  the  plaintiff  was  selling 
another  thing,  and  their  minds  did  not  agree  as  to  the  subject  matter 
of  the  sale,  there  would  be  no  contract  by  which  the  defendant 
would  be  bound,  though  there  was  no  fraud  on  the  part  of  the 
plaintiff.  This  ruling  is  in  accordance  with  the  elementary  principles 
of  the  law  of  contracts,  and  was  correct. 

3.  Effect  of  Unilateral  Mistake. 

Wheaton  Building  and  Lumber  Co.  v.  City  of  Boston.  204 
Mass.  218. 

The  Lumber  Company  sues  the  city  of  Boston  to  recover  a 
check  which  it  had  deposited  to  guarantee  acceptance  in  case  it 
should  be  awarded  a  contract  uj)on  which  it  had  bid.  The  bid 
was  accepted,  and  then  the  company  found  that  it  had  made  an 
honest  but  imjustified  mistake  as  to  the  interpretation  of  the  speci- 
fications. It  contends  that  the  contract  may  be  avoided  on  account 
of  the  mistake. 


FORMATION  OF  CONTRACTS  II5 

Held,  that  a  misconception  as  to  the  consequences  of  language 
is  not  ground  for  rescission. 

Rtigg,  J. 

The  specifications  were  not  capable  of  reasonable  misconstruc- 
tion. The  allowance  plainly  covered  only  certain  interior  steel  work, 
and  did  not  include  structural  steel  for  roofs,  stairs,  ceilings  or 
metal  lathing,  w'hich  were  to  be  constructed  by  the  Roebling  Com- 
pany and  did  not  include  "any  other  work  than  interior  floor  and 
column  construction."  It  is  not  open  to  argument  that  as  matter 
of  plain  construction  of  language  these  important  and  extensive 
elements  of  steel  construction  were  outside  of  the  allowance  and 
must  be  so  considered  by  bidders.  It  is  only  when  the  phrase  of  the 
contract  has  no  obvious  meaning,  or  is  reasonably  capable  of  diverse 
interpretation  and  was  in  fact  differently  understood  by  the  parties, 
that  there  is  no  agreement.  There  was  here  no  mistake  of  fact, 
but  simply  a  misconception  on  the  part  of  the  plaintiff  of  the  conse- 
quences of  the  language  used  in  making  the  proposal.  Against  such 
a  mistake  of  law  the  courts  afford  no  remedy.  Ignorantia  legis 
neminem  exciisat.  The  erroneous  interpretation  of  the  language  of 
the  specifications  was  not  induced  by  anything  said  or  done  by  any 
agent  of  the  defendant.  This  is  the  typical  case  of  misunderstanding 
the  legal  effect  of  language  used  in  an  instrument  freely  signed. 

4.     Mistake  as  to  Nature  of  Transaction. 

Rupley  V.  Daggett.  74  III.  ^^i. 

Daggett  offered  to  sell  a  horse  to  Rupley  for  $65  supposing 
he  had  said,  "$165."  Rupley  asked  if  he  understood  "S65"  cor- 
rectly. Daggett  replied  in  the  affirmative,  supposing  that  the 
amount  over  $100  was  in  question,  not  the  entire  amount.  Rupley 
took  the  horse,  and  Daggett  sties  to  recover  it  on  the  grotmd  that 
there  w^as  no  contract. 

Held,  that  there  is  no  contract  in  case  of  mistake  of  both 
parties  as  to  the  nature  of  the  contract. 

Scott,  /.  ■ 

It  is  very  clear,  from  the  evidence  in  this  case,  there  was  no 
sale  of  the  property  understandingly  made.  Appellee  supposed  he 
was  selling  for  $165,  and  it  may  be  appellant  was  equally  honest 
in  the  belief  that  he  was  buying  at  the  price  of  $65.  If  the  price 
was  to  be  $165,  he  had  never  agreed  to  pay  that  sum,  and  was  under 
no  sort  of  obligation  to  keep  the  property  at  that  price.  It  was  his 
privilege  to  return  it.  On  the  contrary,  appellee  had  never  agreed 
to  sell  for  $65,  and  could  not  be  compelled  to  part  with  his  property 
for  a  less  sum  than  he  chose  to  ask.     It  is  according  to  natural  jus- 


Il6  COMMERCIAL   LAW    CASES 

tice,  where  there  is  a  mutual  mistake  in  regard  to  the  price  of  an 
article  of  property,  there  is  no  sale,  and  neither  party  is  bound. 
There  has  been  no  meeting  of  the  minds  of  the  contracting  parties, 
and  hence  there  can  be  no  sale.  This  principle  is  so  elementary  it 
needs  no  citation  of  authorities  in  its  support.  Any  other  rule  would 
work  injustice  and  might  compel  a  person  to  part  with  his  property 
without  his  consent,  or  to  take  and  pay  for  property  at  a  price  he 
had  never  contracted  to  pay. 

5.  Mistake  as  to  Identity  of  Person. 

Smith  V.  Whcatcroff.  L.  R.  p  Ch.  D.  (Eng.)  22^. 

Wheatcroft  agreed  in  writing  to  sell  certain  land  to  Smith, 
understanding  that  he  was  the  real  principal,  whereas  in  fact  Smith 
was  acting  for  others.  In  a  suit  by  Smith  and  those  others  for 
specific  performance,  Wheatcroft  defends  on  the  ground  of  mis- 
take as  to  the  identity  of  the  person  with  whom  he  was  dealing. 

Held,  that,  notwithstanding  a  mistake  as  to  the  identity  of  the 
person  dealt  with,  if  that  identity  is  immaterial,  the  contract  will 
be  enforceable. 

Fry,  J. 

"Does  error  in  regard  to  the  person  with  whom  I  contract  de- 
stroy the  consent  and  annul  the  agreement?  I  think  that  this  ques- 
tion ought  to  be  decided  by  a  distinction.  Whenever  the  consideration 
of  the  person  with  whom  I  am  willing  to  contract  enters  as  an  ele- 
ment into  the  contract  which  I  am  willing  to  make,  error  with  regard 
to  the  person  destroys  my  consent  and  consequently  annuls  the 
contract.  On  the  contrary,  when  the  consideration  of  the  person 
with  whom  I  thought  I  was  contracting  does  not  enter  at  all  into 
the  contract,  and  I  should  have  been  equally  willing  to  make  the 
contract  with  any  person  whatever  as  with  him  with  whom  I  thought 
I  was  contracting,  the  contract  ought  to  stand."  I  ask  myself  here 
whether  the  defendant  has  shown  that  any  personal  considerations 
entered  into  this  contract?  Has  he  shown  me  that  he  would  have 
been  unwilling  to  enter  into  a  contract  in  the  same  terms  with  any- 
body else  ?  I  say  distinctly  that  he  has  failed  to  produce  such  an 
effect  on  my  mind,  and  that  being  so,  I  give  judgment  for  specific 
performance. 

6.  Mistake  as  to  Identity  of  Person. 

Edmunds  v.  Merchants'  Despatch  Transportation  Co.  135 
Mass.  283. 

A  swindler  representing  himself  to  be  Pape  of  Dayton,  Ohio, 
bought  goods  from  the  plaintiffs  in  the  name  of  Pape,  and  had 


FORMATION    OF    COxVTRACTS  11/ 

them  shipped  to  Dayton.  At  that  place  they  were  deHvered  to 
him  by  the  defendant  carrier.  The  plaintiffs  sue  the  defendant  for 
delivering  the  goods  to  the  swindler,  claiming  that  the  title  to  the 
goods  was  still  in  them. 

In  another  case  tried  with  this  case,  the  swindler,  instead  of 
representing  himself  to  be  Pape,  represented  himself  to  be  the 
brother  of  Pape,  acting  as  his  agent. 

Held,  that  mistake  as  to  the  identity  of  the  person  will  not  avoid 
a  contract  unless  that  mistake  brings  it  about  that  there  is  no  sale 
to  such  person. 

Morton,  C.  J. 

[In  the  first  case]  we  think  it  clear,  upon  principle  and  au- 
thority, that  there  was  a  sale,  and  the  property  in  the  goods  passed 
to  the  purchaser.  The  minds  of  the  parties  met  and  agreed  upon  all 
the  terms  of  the  sale,  the  thing  sold,  the  price  and  time  of  pay- 
ment, the  person  selling  and  the  person  buying.  The  fact  that  the 
seller  was  induced  to  sell  by  fraud  of  the  buyer  made  the  sale  void- 
able, but  not  void.  He  could  not  have  supposed  that  he  was  selling 
to  any  other  person ;  his  intention  was  to  sell  to  the  person  present, 
and  identified  by  sight  and  hearing ;  it  does  not  defeat  the  sale  be- 
cause the  buyer  assumed  a  false  name,  or  practised  any  other  deceit 
to  induce  the  vendor  to  sell. 

In  the  case  before  us,  there  was  a  de  facto  contract,  purport- 
ing, and  by  which  the  plaintiffs  intended,  to  pass  the  property  and 
possession  of  the  goods  to  the  person  buying  them;  and  we  are  of 
opinion  that  the  property  did  pass  to  the  swindler  who  bought  the 
goods.  The  sale  was  voidable  by  the  plaintiffs ;  but  the  defendant, 
the  carrier  by  whom  they  were  forwarded,  had  no  duty  to  inquire 
into  its  validity.  The  person  who  bought  them,  and  who  called  him- 
self Edward  Pape,  owned  the  goods,  and  upon  their  arrival  in 
Dayton,  had  the  right  to  demand  them  of  the  carrier.  In  delivering 
them  to  him,  the  carrier  was  guilty  of  no  fault  or  negligence. 

[In  the  second  case]  the  contract  did  not  purport,  nor  the  plain- 
tiffs intend,  to  sell  to  the  person  who  was  present  and  ordered  the 
goods.  The  swindler  introduced  himself  as  a  brother  of  Edward 
Pape  of  Dayton,  Ohio,  buying  for  him.  By  referring  to  the  mer- 
cantile agency,  he  tacitly  represented  that  he  was  buying  for  the 
Edward  Pape  who  was  there  recorded  as  a  man  of  means.  The 
plaintiffs  understood  that  they  were  selling,  and  intended  to  sell, 
to  the  real  Edward  Pape.  There  was  no  contract  made  with  him, 
because  the  swindler  who  acted  as  his  agent  had  no  authority,  but 
there  was  no  contract  of  sale  made  with  any  one  else.  The  relation 
of  vendor  and  vendee  never  existed  between  the  plaintiffs  and  the 
swindler.  The  property  in  the  goods,  therefore,  did  not  pass  to  the 
swindler;  and  the  defendant  cannot  defend,  as  in  the  other  case, 
upon  the  ground  that  it  has  delivered  the  goods  to  the  real  owner. 


Il8  COMMERCIAL    LAW    CASES 

7.    Mistake  as  to  Existence  of  Subject  Matter. 

Duncan  v.  The  New  York  Mutual  Insurance  Co.  ij8  N.  Y.  88. 

The  Insurance  Company  insured  a  vessel  belonging  to  the  as- 
signor of  the  plaintiff  for  one  year  from  August  3,  1888,  under 
a  contract  allowing  cancellation  of  the  policy  on  arrival  of  the  ship 
at  port.  The  parties  agreed  in  November  to  cancel  the  contract 
as  of  December  3,  1888,  and  the  unearned  part  of  the  premium 
was  returned.  Neither  party  knew  that  the  vessel  had  been  lost 
in  the  meantime.    Duncan  sues  for  the  amount  of  the  policy. 

Held,  that  a  mistake  of  fact  as  to  the  existence  of  the  subject 
matter  is  ground  for  rescission. 

Earl,  J. 

The  plaintifiF  in  his  complaint  alleged  all  the  facts  and  prayed 
for  relief  that  the  cancellation  of  the  policy  should  be  rescinded 
and  set  aside  and  that  he  should  recover  $5,000,  less  the  sum  of 
$233.33  returned  to  him  for  the  unearned  premium.  The  trial 
court  found,  what  was  absolutely  true,  that  the  cancellation  was 
made  by  mistake.  The  insured  could  demand  the  return  of  unearned 
premium  only  upon  the  arrival  of  the  steamship  at  her  destina- 
tion, and  it  was  only  upon  her  arrival  that  the  defendant  was  bound 
to  make  the  cancellation  and  return  the  premium.  Both  parties 
manifestly  supposed  on  the  3rd  day  of  December  that  the  vessel  had 
reached  her  destination.  Both  parties  were  mistaken  as  to  that  fact, 
and  both  were  ignorant  of  the  loss  of  the  vessel  prior  to  that  time. 
So  it  is  entirely  clear  that  the  cancellation  was  made  under  a  mis- 
take of  fact.  It  was  at  least  made  under  a  mistake  of  fact  by  the 
plaintiff,  and,  therefore,  upon  the  return  of  the  money  paid  to  him 
he  was  entitled,  under  familiar  principles  of  law,  to  have  the  can- 
cellation rescinded.  Ignorance  of  a  fact  extrinsic  and  not  essential 
to  a  contract,  but  which,  if  known,  might  have  influenced  the  action 
of  a  party  to  the  contract,  is  not  such  a  mistake  as  will  authorize 
equitable  relief;  as  to  such  facts  the  party  must  rely  upon  his  own 
vigilance,  and  if  not  imposed  upon  or  defrauded  he  will  be  held  to 
his  contract.  Here  the  essential  facts  in  reference  to  which  the 
parties  were  mistaken  were  not  extrinsic  but  they  were  intrinsic 
and  essential  to  the  contract  of  cancellation  and  were  involved 
therein.  The  parties  were  dealing  with  the  i)olicy  which  both  sup- 
posed to  be  in  force  covering  the  risk  insured  on  the  3d  day  of 
December,  with  premiums  which  both  i)artics  believed  were  un- 
earned, in  reference  to  a  vessel  which  both  parties  believed  to  be 
in  existence.  As  to  all  of  these  facts  they  were  mistaken.  The  vessel 
was  lost.  The  policy  had  matured,  and  all  the  premiums  had  been 
earned. 


FORMATION    OF    CONTRACTS  IIQ 

8.     Mistake  as  to  Identity  of  Subject  Matter. 

Kennedy  v.  Panama,  etc.  Royal  Mail  Co.  L.  R.  2  Q.  B.  Cas. 
(Eng.)  580. 

Lord  Kennedy  subscribed  to  stock  in  tbe  Mail  Company,  rely- 
ing upon  a  statement  by  officials  of  the  company  that  they  had 
a  government  contract  for  the  carriage  of  mail  to  New  Zealand. 
This  statement  they  then  believed  to  be  true,  although  it  was  sub- 
sequently determined  that  the  fact  was  otherwise.  Lord  Kennedy 
seeks  to  set  aside  his  subscription  on  the  ground  of  mistake. 

Held,  that  this  was  not  such  a  mistake  in  identity  of  the  sub- 
ject matter  as  to  be  ground  for  avoiding  the  contract. 

Blackburn,  J. 

It  was  contended  that  the  effect  of  the  prospectus  was  to  war- 
rant to  the  intended  shareholders  that  there  really  was  such  a 
contract  as  is  there  represented,  and  not  merely  to  represent  that 
the  company  bona  fide  believed  it ;  and  that  the  difference  in  sub- 
stance between  shares  in  a  company  with  such  a  contract  and  shares 
in  a  company  whose  supposed  contract  was  not  binding,  was  a  dif- 
ference in  substance  in  the  nature  of  the  thing;  and  that  the  share- 
holder was  entitled  to  return  the  shares  as  soon  as  he  discovered 
this,  quite  independently  of  fraud,  on  the  ground  that  he  had 
applied  for  one  thing  and  got  another.  And,  if  the  invalidity  of 
the  contract  really  made  the  shares  he  obtained  different  things  in 
substance  from  those  which  he  applied  for,  this  would,  we  think, 
be  good  law.  The  case  would  then  resemble  [cases]  where  the  person, 
who  had  honestly  sold  what  he  thought  a  bill  without  recourse  to 
him,  was  nevertheless  held  bound  to  return  the  price  on  its  turning 
out  that  the  supposed  bill  was  a  forgery  in  the  one  case,  and  void 
under  the  stamp  laws  in  the  other;  in  both  cases  the  ground  of  the 
decision  being  that  the  thing  handed  over  was  not  the  thing  paid 
for.  There  is,  however,  a  very  important  difference  between  cases 
where  a  contract  may  be  rescinded  on  account  of  fraud  and  those  in 
which  it  may  be  rescinded  on  the  ground  that  there  is  a  difference 
in  substance  between  the  thing  bargained  for  and  that  obtained. 
It  is  enough  to  show  that  there  was  a  fraudulent  representation 
as  to  any  part  of  that  which  induced  the  party  to  enter  into  the 
contract  which  he  seeks  to  rescind;  but  where  there  has  been  an 
innocent  misrepresentation  or  misapprehension,  it  does  not  author- 
ize a  rescission  unless  it  is  such  as  to  show  that  there  is  a  com- 
plete difference  in  substance  between  what  was  supposed  to  be  and 
what  was  taken,  so  as  to  constitute  a  failure  of  consideration.  For 
example,  where  a  horse  is  bought  under  a  belief  that  it  is  sound, 
if  the  purchaser  was  induced  to  buy  by  a  fraudulent  representation 
as  to  the  horse's  soundness,  the  contract  may  be  rescinded.     If  it 


I20  COMMERCIAL    LAW    CASES 

was  induced  by  an  honest  misrepresentation  as  to  its  soundness, 
though  it  may  be  clear  that  both  vendor  and  purchaser  thought  that 
they  were  deaHng  about  a  sound  horse  and  were  in  error,  yet  the 
purchaser  must  pay  the  whole  price,  unless  there  was  a  warranty ; 
and  even  if  there  was  a  warranty,  he  cannot  return  the  horse  and 
claim  back  the  whole  price,  unless  there  was  a  condition  to  that 
effect  in  the  contract. 

The  principle  is  well  illustrated  in  the  civil  law.  There, — 
after  laying  down  the  general  rule,  that  where  the  parties  are  not 
at  one  as  to  the  subject  of  the  contract  there  is  no  agreement,  and 
that  this  applies  where  the  parties  have  misapprehended  each  other 
as  to  the  corpus,  as  where  an  absent  slave  was  sold  and  the  buyer 
thought  he  was  buying  Pamphilus  and  the  vendor  thought  he  was 
selling  Stichus;  and  pronouncing  the  judgment  that  in  such  a  case 
there  was  no  bargain  because  there  was  "error  in  corpore,"  the 
answers  given  are  to  the  effect,  that  if  there  be  misapprehension 
as  to  the  substance  of  the  thing  there  is  no  contract;  but  if  it  be 
only  a  difference  in  some  quality  or  accident,  even  though  the  mis- 
apprehension may  have  been  the  actuating  motive  to  the  purchaser, 
yet  the  contract  remains  binding.  And,  as  we  apprehend,  the  prin- 
ciple of  our  law  is  the  same  as  that  of  the  civil  law ;  and  the  difficulty 
in  every  case  is  to  determine  whether  the  mistake  or  misapprehen- 
sion is  as  to  the  substance  of  the  whole  consideration,  going, 
as  it  were,  to  the  root  of  the  matter,  or  only  to  some  point,  even 
though  a  material  point,  an  error  as  to  which  does  not  affect  the 
substance  of  the  whole  consideration. 

In  the  present  case  the  prospectus  states  that  the  issue  of  the 
new  shares  was  authorized  by  a  meeting.  Had  that  been  a  mistake, 
we  think  it  would  have  been  in  the  substance,  as  the  applicant  would 
not  have  had  shares  at  all ;  but  that  statement  was  quite  accurate, 
and  he  got  shares  in  the  company.  It  was  stated  in  the  prospectus 
that  the  motive  for  the  increase  of  the  capital  was  to  enable  the 
company  to  work  the  new  contract.  That  also  was  strictly  accurate. 
It  was,  by  implication,  stated  that  the  contract  was  binding,  and  this 
was  a  misstatement,  though  an  innocent  one ;  but  we  do  not  think 
that  it  affected  the  substance  of  the  matter,  for  the  applicant  actually 
got  shares  in  the  very  company  for  shares  in  which  he  had  applied; 
and  that  company  has,  by  means  of  the  invalid  contract,  got  the 
benefit,  and  is  now  carrying  the  mails  on  terms,  not  the  same  as  those 
they  supposed,  and  perhaps  not  so  profitable,  but  still  on  profitable 
terms.  We  think  there  was  a  misapprehension  as  to  that  which  was 
a  material  part  of  the  motive  inducing  the  applicant  to  ask  for  the 
shares,  but  not  preventing  the  shares  from  being  in  substance  those 
he  applied  for. 

These  would  not  be  legitimate  considerations  if  there  had  been 
fraud  in  those  acting  for  the  company ;  doubtless,  in  such  a  case  the 
conii>any  must  bear  all  the  consequences  of  the  fraud  of  those  they 
employ,     lint  if  the  ciucstion  be,  as  we  think  it  is,  whether  the  mis- 


FORMATION    OF    CONTRACTS  121 

apprehension  as  to  the  contract  goes  to  the  root  and  substance  of  the 
matter,  so  as  to  make  the  shares  which  the  applicant  has  obtained  in 
a  company  with  this  questionable  contract  substantially  different 
things  from  shares  in  a  company  with  a  valid  contract,  we  think  those 
considerations  are  legitimate ;  and  they  lead  us  to  the  conclusion 
that  the  case  is  analogous  to  that  of  the  horse  supposed  to  be  sound 
and  not  really  so,  and  not  to  the  case  of  a  thing  substantially  dif- 
ferent. 

9.     Mistake  as  to  Nature  of  Promise  Known  to  Other  Party. 

The  Town  of  Essex  v.  Day.  52  Conn.  48 2. 

The  town  of  Essex  issued  twenty  year  bonds,  intending  that 
they  should  be  payable  at  the  option  of  the  town  at  the  end  of 
ten  years.  By  mistake,  they  were  issued  without  that  provision. 
This  suit  is  brought  to  correct  bonds  in  the  hands  of  Day,  who 
had  purchased  them  with  full  knowledge  of  the  facts. 

Held,  that  a  contract  may  be  corrected  in  case  of  a  mistake 
in  the  nature  of  the  promise  which  is  known  to  the  other  party. 

Loomis,  J. 

Was  the  mistake  one  of  such  a  character  that  it  can  be  cor- 
rected by  a  court  of  equity  ? 

It  is  claimed  by  the  counsel  for  the  defendant  that  the  mis- 
take, in  such  a  case,  must  be  mutual,  and  the  cause  of  the  agreement ; 
and   numerous  authorities   are  cited   in   support  of  the  proposition. 

This  rule,  within  the  limits  of  its  proper  application,  is  founded 
in  reason.  If  a  contract  is  corrected  by  a  court  of  chancery  to 
make  it  conform  to  the  intention  of  one  of  the  parties,  it  is  of  course 
forcing  a  contract  upon  the  other  party  which  he  never  intended  to 
make,  unless  his  own  intent  concurred  with  that  of  the  other  party. 
But  this  case  is  not  of  that  character  nor  governed  by  that  rule. 
A  grantor  by  mistake  embraces  in  his  deed  a  parcel  of  land  that 
neither  party  intended  to  have  conveyed.  The  grantee  sees  his 
mistake,  but  does  not  call  the  attention  of  the  grantor  to  it,  and 
afterwards  claims  the  parcel  thus  accidentally ""  conveyed.  Or  a 
person  offers  a  reward  of  $100  for  the  detection  and  arrest  of  a  bur- 
glar, but  by  mistake  and  without  his  notice  it  is  printed  $1,000.  A 
man  who  knows  of  the  mistake  arrests  the  burglar  and  claims  the 
$1,000.  In  each  of  these  cases  the  error  is  not  mutual,  but  wholly 
on  the  one  side.  What  is  there  on  the  other?  Not  mistake,  but  fraud. 
That  fraud  can  never  stand  for  a  moment  in  a  court  of  equity.  But 
suppose  the  case  to  be  one  where,  instead  of  actual  fraud,  there  is 
merely  such  knowledge,  actual  or  imputed  by  the  law,  as  makes  it 
inequitable  for  the  purchaser  to  retain  his  advantage.  The  court 
will  deal  as  summarily  with  that  inequitable  position  of  the  party, 
as  in  the  other  case  with  his  fraud. 


122  COMMERCIAL   LAW    CASES 

"The  mistake  of  one  party  only  is  attended  by  different  conse- 
quences, according  as  the  other  party  is  or  is  not  cognizant  of  the 
mistake.  An  agreement  cannot  be  affected  by  the  mistake  of  either 
party  in  expressing  his  intention,  of  which  the  other  party  has  no 
knowledge.  A  man  cannot  have  relief  on  the  ground  of  mistake, 
unless  the  party  benefited  by  the  mistake  is  disentitled  in  equity  and 
conscience   from  retaining  the   advantage   which  he   has  acquired." 

10.     Mistake  as  to  Value  of  Subject  Matter. 

Wood  v.  Boynton.  64  Wis.  265. 

The  plaintiff  brought  a  stone  to  the  defendants,  partners  in  the 
jewelry  business,  and  upon  their  offer  to  buy  it  for  a  dollar,  sold 
it  to  them  for  that  price.  It  was  an  uncut  diamond,  but  neither 
party  knew  that  fact.  The  plaintiff  now  seeks  to  rescind  the  sale 
on  the  ground  of  mistake. 

Held,  that  a  mistake  as  to  the  value  of  the  subject  matter  will 
not  warrant  rescission  of  a  contract. 

Taylor,  J. 

The  only  question  in  the  case  is  whether  there  was  anything  in 
the  sale  which  entitled  the  vendor  to  rescind  the  sale  and  so  revest 
the  title  in  her.  The  only  reasons  we  know  of  for  rescinding  a 
sale  and  revesting  the  title  in  the  vendor  so  that  he  may  maintain 
an  action  at  law  for  the  recovery  of  the  possession  against  his  vendee 
are  (i)  that  the  vendee  was  guilty  of  some  fraud  in  procuring  a 
sale  to  be  made  to  him;  (2)  that  there  was  a  mistake  made  by  the 
vendor  in  delivering  an  article  which  was  not  the  article  sold, — 
a  mistake  in  fact  as  to  the  identity  of  the  thing  sold  with  the  thing 
delivered  upon  the  sale.  This  last  is  not  in  reality  a  rescission  of 
the  sale  made,  as  the  thing  delivered  was  not  the  thing  sold,  and 
no  title  ever  passed  to  the  vendee  by  such  delivery. 

In  this  case,  upon  the  plaintiff's  own  evidence,  there  can  be 
no  just  ground  for  alleging  that  she  was  induced  to  make  the  sale 
she  did  by  any  fraud  or  unfair  dealings  on  the  part  of  Mr.  Boynton. 
Both  were  entirely  ignorant  at  the  time  of  the  character  of  the  stone 
and  of  its  intrinsic  value.  Mr.  Boynton  was  not  an  expert  in  uncut 
diamonds,  and  had  made  no  examination  of  the  stone,  except  to  take 
it  in  his  hand  and  look  at  it  before  he  made  the  offer  of  one  dollar, 
which  was  refused  at  the  time,  and  afterwards  accepted  without  any 
comment  or  further  examination  made  by  Mr.  Boynton.  The  appel- 
lant had  the  stone  in  her  possession  for  a  long  time,  and  it  appears 
from  her  own  statement  that  she  had  made  some  inquiry  as  to  its 
nature  and  qualities.  If  she  chose  to  sell  it  without  further  investiga- 
tion as  to  its  intrinsic  value  to  a  person  who  was  guilty  of  no  fraud 
or  unfairness  which  induced  her  to  sell  it  for  a  small  sum,  she  cannot 


FORMATION    OF    CONTRACTS  I23 

repudiate   the   sale   because    it    is   afterwards   ascertained   that    she 
made  a  bad  bargain. 

There  is  no  pretense  of  any  mistake  as  to  the  identity  of  the 
thing  sold.  It  was  produced  by  the  plaintiff  and  exhibited  to  the 
vendee  before  the  sale  was  made,  and  the  thing  sold  was  delivered 
to  the  vendee  when  the  purchase  price  was  paid.  Suppose  the 
appellant  had  produced  the  stone,  and  said  she  had  been  told  that 
it  was  a  diamond,  and  she  believed  it  was,  but  had  no  knowledge 
herself  as  to  its  character  or  value,  and  Mr.  Boynton  had  given 
her  $500  for  it,  could  he  have  rescinded  the  sale  if  it  had  turned 
out  to  be  a  topaz  or  any  other  stone  of  very  small  value?  Could 
Mr.  Boynton  have  rescinded  the  sale  on  the  ground  of  mistake  ? 
Clearly  not,  nor  could  he  rescind  it  on  the  ground  that  there  had 
been  a  breach  of  warranty,  because  there  was  no  warranty,  nor 
could  he  rescind  it  on  the  ground  of  fraud,  unless  he  could  show 
that  she  falsely  declared  that  she  had  been  told  it  was  a  diamond, 
or,  if  she  had  been  told  so,  still  she  knew  it  was  not  a  diamond. 

II.     Mistake  of  Law. 

Reggio  v.  Warren.  2oy  Mass.  52^. 

Reggio  seeks  to  set  aside  a  release  of  his  right  to  certain  pay- 
ments under  a  will.  The  release  was  given  upon  an  agreement 
by  the  trustees  to  pay  a  promissory  note  which  they  made  to 
Reggio,  but  which,  it  subsequently  developed,  they  had  no  power 
to  make,  they  and  he  assuming  at  the  time  that  such  a  transaction 
was  proper. 

Held,  that  when  a  person  enters  into  a  transaction  through  a 
mistake  as  to  his  own  antecedent  rights,  he  may  obtain  rescission. 

Sheldon,  J. 

It  is  a  general  doctrine  that,  as  it  is  the  duty  of  every  one  to 
conform  his  conduct  to  the  requirements  of  the  law,  so  all  men 
must  be  treated  alike  in  courts  of  civil  and  criminal  jurisdiction, 
as  being  aware  of  the  duties  and  obligations  which  are  imposed 
upon  them  by  the  law,  and  that  ordinarily  one  cannot  successfully 
ask  for  affirmative  relief  or  defend  himself  against  an  otherwise 
well  founded  claim,  on  the  bare  ground  that  he  was  either  ignorant 
of  the  law  or  mistaken  as  to  what  it  prescribed. 

But  it  is  now  well  settled  that  this  rule  is  not  invariably  to 
be  applied.  In  some  cases  VN'here  great  injustice  would  have  been 
done  by  its  enforcement,  this  has  been  avoided  by  declaring  that  a 
mistake  as  to  the  title  to  property  or  as  to  the  existence  of  certain 
particular  rights,  though  caused  by  an  erroneous  idea  as  to  the  legal 
effect  of  a  deed  or  as  to  the  duties  or  obligations  created  by  an 
agreement,  was  really  a  mistake  of  fact  and  not  strictly  one  of  law, 
and  so  did  not  constitute  an  insuperable  bar  to  relief.    In  other  cases, 


124  COMMERCIAL    LAW    CASES 

a  distinction  between  ignorance  or  mistake  as  to  a  general  rule  of 
law  prescribing  conduct  and  establishing  rights  and  duties,  and  one 
as  to  the  private  right  or  interests  of  a  party  under  a  written  instru- 
ment, has  been  laid  down;  and  it  has  been  declared  that,  while  relief 
could  not  be  given  by  reason  of  a  mistake  of  the  former  kind,  one  of 
the  latter  kind  shared  by  both  parties  to  an  agreement  and  resulting 
in  a  loss  of  the  rights  of  one  of  them,  may  be  set  aside  at  the  suit 
of  the  injured  party,  though  no  fraud  was  practised  upon  him.  The 
distinction  taken  is  between  the  general  law  of  the  country,  for 
ignorance  of  which  no  one  is  excused,  and  private  rights  which  de- 
pend upon  the  existence  of  particular  facts  and  the  rules  which  the 
law  declares,  as  to  those  facts. 

In  other  cases,  sometimes  as  the  ground  of  decision  and  some- 
times merely  in  discussion  or  argument,  it  has  been  said  that  there 
is  no  established  rule  forbidding  the  giving  relief  to  one  injured 
by  reason  of  a  mistake  of  law,  but  that  whenever  it  is  clearly  shown 
that  parties  in  their  dealings  with  each  other  have  acted  under  a 
common  mistake  of  law  and  the  party  injured  thereby  can  be  relieved 
without  doing  injustice  to  others,  equity  will  afford  him  redress. 
So  it  has  been  said  that  the  important  question  was  not  whether 
the  mistake  was  one  of  law  or  of  fact,  but  whether  the  particular 
mistake  was  such  as  a  court  of  equity  will  correct,  and  this  depends 
upon  whether  the  case  falls  within  the  fundamental  principle  of 
equity  that  no  one  shall  be  allowed  to  enrich  himself  unjustly  at 
the  expanse  of  another  by  reason  of  an  innocent  mistake  of  law  or 
of  fact  entertained  by  both  parties. 

The  correct  doctrine  both  upon  principle  and  authority  was 
stated  by  the  Supreme  Court  of  Michigan  in  Renard  v.  Clink,  91 
Mich.  I,  3:  "While  it  is  a  general  rule  that  equity  will  not  relieve 
against  a  mistake  of  law,  this  rule  is  not  universal.  Where  parties, 
with  knowledge  of  the  facts,  and  without  any  inequitable  incidents, 
have  made  an  agreement  or  other  instrument  as  they  intended  it 
should  be,  and  the  writing  expresses  the  transaction  as  it  was 
understood  and  designed  to  be  made,  equity  will  not  allow  a  de- 
fense, or  grant  a  reformation  or  rescission,  although  one  of  the  par- 
ties may  have  been  mistaken  or  misconceived  its  legal  meaning,  scope, 
or  effect.  But  where  a  person  is  ignorant  or  mistaken  with  respect 
to  his  own  antecedent  and  existing  private  legal  rights,  interests, 
or  estates,  and  enters  into  some  transaction,  the  legal  scope  and 
operation  of  which  he  correctly  apprehends  and  understands,  for  the 
purpose  of  affecting  such  assumed  rights,  interests,  or  estates,  equity 
will  grant  its  relief,  defensive  or  aflirmative,  treating  the  mistake  as 
analogous  to,  if  not  identical  with,  a  mistake  of  fact." 

12.     Mistake  as  to  Law  of  Another  Jurisdiction. 

Haven  v.  Foster,  p  Pick.  (Mass.)   iii. 

Craigie,  a  resident  of  Cambridge,  Massachusetts,  owned  real 


FORMATION  OF  CONTRACTS  I25 

estate  in  New  York.  Upon  his  death,  the  property  descended  to 
his  niece,  the  plaintiff,  the  daughter  of  his  sister  EUzabeth,  and 
to  his  three  nephews,  one  of  whom  was  the  defendant,  sons  of 
his  sister  Mary.  All  four  effected  a  settlement  under  which 
each  took  one  quarter  of  the  proceeds,  assuming  that  to  be  the 
proper  division.  However,  under  a  New  York  statute,  of  which 
all  parties  were  ignorant,  the  plaintiff  was  entitled  to  one  half  the 
proceeds,  and  she  now  sues  to  recover  that  share. 

Held,  that  a  mistake  as  to  the  law  of  another  state  is  a  mistake 
of  fact. 

Morton,  J. 

The  misapprehension  or  ignorance  of  the  parties  to  this  suit 
related  to  a  statute  of  the  state  of  New  York.  Is  this,  in  the  present 
question,   to   be   considered    fact   or   law  ? 

The  existence  of  any  foreign  law  must  be  proved  by  evidence 
showing  what  it  is.  And  there  is  no  legal  presumption  that  the 
law  of  a  foreign  state  is  the  same  as  it  is  here.  If  a  foreign  law 
is  unwritten,  it  may  be  proved  by  parol  evidence;  but  if  written, 
it  must  be  proved  by  documentary  evidence.  The  laws  of  other 
states  in  the  Union  are  in  these  respects  foreign  laws. 

The  courts  of  this  state  are  not  presumed  to  know  the  laws  of 
other  states  or  foreign  nations,  nor  can  they  take  judicial  cog- 
nizance of  them,  til!  they  are  legally  proved  before  them.  But  when 
established  by  legal  proof,  they  are  to  be  construed  by  the  same 
rules  and  to  have  the  same  effect  upon  all  subjects  coming  within 
their  operation,  as  the  laws  of  this  state. 

That  the  lexi  loci  rei  sitae  must  govern  the  descent  of  real  estate, 
is  a  principle  of  our  law,  with  which  everyone  is  presumed  to  be 
acquainted.  But  what  the  Icxi  loci  is,  the  court  can  only  learn 
from  proof  adduced  before  them.  The  parties  knew,  in  fact,  that 
the  intestate  died  seised  of  estate  situated  in  the  state  of  New  York. 
They  must  be  presumed  to  know  that  the  distribution  of  that  estate 
must  be  governed  by  the  laws  of  New  York.  But  are  they  bound, 
on  their  peril,  to  know  what  the  provisions  of  these  laws  are  ? 
If  the  judicial  tribunals  are  not  presumed  to  know,  why  should 
private  citizens  be?  If  they  are  to  be  made  known  to  the  court  by 
proof,  like  other  facts,  why  should  not  ignorance  of  them  by  private 
individuals  have  the  same  effect  upon  their  acts  as  ignorance  of 
other   facts  ? 

We  are  of  opinion,  that  in  relation  to  the  question  now  before 
us,  the  statute  of  New  York  is  to  be  considered  as  a  fact. 

In  the  view  which  we  have  taken  of  this  case,  it  appears  that 
the  defendant  received  a  part  of  the  consideration  for  which  the 
plaintiff's  estate  was  sold;  that  it  was  received  by  mistake;  and 
that  this  mistake  was  in  a  matter  of  fact.  He  therefore  has  in  his 
hands  money  which  he  is  bound  to  repay,  and  there  is  no  principle  of 
law  which  interposes  to  prevent  the  recovery  of  it  out  of  his  hands. 


126  COMMERCIAL    LAW    CASES 

B.     Misrepresentation  and  Fraud. 

I.     Innocent  Misrepresentation  in  General. 

Johnston  v.  Bent,  pj  Ala.  i6i. 

The  plaintiff,  Bent,  sold  organs  to  Grambs  &  Buchanan,  upon 
Buchanan's  representation  that  the  firm  had  a  certain  excess  of 
assets  over  liabilities,  which  Buchanan  reasonably  believed.  Upon 
the  firm  becoming  insolvent,  Bent  seeks  to  recover  the  goods, 
contending  that  the  contract  was  voidable  on  account  of  the  mis- 
representation. 

Held,  that  an  innocent  misrepresentation  which  does  not  amount 
to  fraud  will  not  justify  rescission  of  the  contract. 

Clapton,  J. 

The  authorities  differ  as  to  what  conduct,  misrepresentations 
or  concealments  constitute  such  a  fraud  as  will  effectively  avoid 
a  sale  of  goods  on  credit,  so  as  to  authorize  the  seller  to  reclaim 
them.  Some  hold  that  actual  artifice,  contrivance  or  false  pretense, 
intended  and  operative  to  deceive,  is  essential ;  others,  that  when 
the  vendee  induces  the  owner  of  goods  to  sell  them  on  credit  by 
concealing  a  positive  intention  not  to  pay  for  them,  this  is  a  fraud 
which  entitles  the  owner  to  disaffirm  the  contract,  and  recover  the 
goods  from  the  purchaser,  though  there  may  be  no  fraudulent  mis- 
representation, or  actual  artifice;  and  others,  that  the  concealment 
from  the  seller  of  the  buyer's  insolvency,  known  to  himself,  and 
that  he  has  no  reasonable  expectation  of  ability  to  pay  for  the  goods, 
is  not  sufficient,  but  otherwise  if  there  be  actual  deceit.  As  a 
general  proposition,  sustained  by  the  preponderance  of  authority, 
where  a  party,  being  insolvent  or  financially  embarrassed,  induces  the 
owner  to  sell  him  goods  on  credit,  having  an  intent  not  to  pay  for 
them,  by  fraudulently  concealing  or  misrepresenting  his  insolvency, 
he  perpetrates  a  fraud  which  entitles  the  vendor  to  disaffirm  the 
contract  and  recover  the  goods  from  him. 

The  case  made  by  the  record  does  not  come  within  either  of  these 
kinds  or  classes  of  frauds.  No  contrivance,  or  device  intended  to 
deceive,  was  used,  and  there  was  no  fraudulent  misrepresentation  or 
concealment.  We  have  mentioned  the  various  statements  of  the  doc- 
trine on  this  subject  by  the  authorities  for  tlie  puri)0se  of  showing 
that  all  of  them  rest  on  the  fundamental  principle,  that  the  artifice, 
representation  or  concealment  must  be  fraudulent  in  its  nature  and 
character,  tliough  the  authorities  differ  as  to  what  is  sufticient.  In 
order  to  justify  a  vendor  in  disaffirming  a  sale  of  goods  as  fraud- 
ulent, so  as  to  authorize  a  recovery  in  detinue  or  trover  against 
the  purchaser,  there  must  co-exist  at  the  time  of  the  purchase  in- 
solvency, or  failing  circumstances,  a  pre-conceived  design  not  to  pay 


FORMATION  OF  CONTRACTS  127 

for  the  goods,  or  its  equivalent  (no  reasonable  expectation  of  being 
able  to  pay  for  them),  and  a  fraudulent  concealment  of,  or  fraudulent 
representation  in  reference  to,  one  or  more  of  these  facts.  From 
this  statement  of  the  rule  it  is  manifest  that  intentional  fraud  in 
the  misrepresentation  or  concealment  is  requisite. 

While  an  innocent  misrepresentation  of  a  material  fact,  induc- 
ing a  contract,  may  be  regarded  in  equity  as  constructive  fraud, 
warranting  its  avoidance,  this  court  has  never  declared  that  it  con- 
stitutes what  has  been  termed  a  legal  fraud,  sufficient,  by  the  rules 
of  the  common  law,  to  avoid  the  contract  at  law,  so  as  to  revest  the 
property  and  authorize  the  seller  to  bring  detinue  for  the  recovery 
of  the  goods,  or  trover  for  their  conversion.  "As  to  the  buyer's 
right  to  rescind  a  contract  induced  by  false  representation,  the  prin- 
ciples adopted  and  applied  by  the  courts  of  equity  had,  before  the 
judicial  act,  a  much  wider  scope  than  those  of  the  common  law.  At 
common  law,  except  in  the  case  of  an  innocent  misrepresentation 
affecting  the  substance  of  the  contract,  the  buyer's  right  to  rescind 
was  governed  by  the  same  considerations  as  would  have  entitled 
him  to  maintain  an  action  of  deceit ;  but  it  seems  clear  that,  to 
obtain  relief  in  equity,  it  was  sufficient  for  the  buyer  to  prove  that 
the  misrepresentation  was  a  material  one  inducing  the  contract,  and 
was  false  in  fact.  The  rights  of  the  buyer  and  seller,  in  this  respect, 
are  correlative.  The  right  to  rescind  does  not  arise  at  law,  unless 
the  representation  be  false  to  the  knowledge  of  the  party  making  it, 
or,  at  least,  made  by  him  recklessly,  without  reasonable  grounds  for 
believing  it  true,  or  under  circumstances  showing  that  he  was  re- 
gardless of  its  truth  or  falsity,  in  which  case  it  cannot  be  regarded 
as  innocently  made.  A  representation,  though  false,  which  the  party 
making  believes,  in  good  faith  and  on  reasonable  grounds,  to  be 
true,  furnishes  no  justification  for  avoiding  a  sale  at  law,  as  obtained 
by  fraud,  whatever  other  remedies  may  be  available." 

2.     Misrepresentation  of  a  Tei^m  of  the  Contract. 

Behn  v.  Burness.  ^  B.  &  S.  (Eng.)  /ji. 

Behn  agreed  to  charter  his  ship,  the  Montahan,  to  Burness  for 
carriage  of  coal  to  Hong  Kong.  In  the  charter  party,  it  was 
stated  that  the  ship  was  "now  in  the  port  of  Amsterdam,"  at 
which  port  the  ship  did  not  in  fact  arrive  until  several  days  later. 
Burness  refused  to  accept  the  ship  when  ready  to  load,  and  con- 
tends that  the  representation  was  a  condition  of  the  contract. 

Held,  that  an  innocent  misrepresentation  concerning  an  essen- 
tial term  of  the  contract,  is  ground  for  rescission  of  the  contract. 

Williams,  J. 

The  question  in  this  case  is,  whether  the  statement  in  the  charter 
party  that  the  ship  is  "now  in  the  port  of  Amsterdam,"  is  a  "repre- 


128  COMMERCIAL   LAW    CASES 

sentation"  or  a  "warranty,"  using  the  latter  word  as  synonymous 
with  "condition" ;  in  which  sense  it  has  been  for  many  years  under- 
stood with  respect  to  policies  of  insurance  and  charter  parties. 

It  may  be  expedient  to  commence  the  consideration  of  this 
question  by  some  examination  into  the  nature  of  representations. 
Properly  speaking,  a  representation  is  a  statement,  or  assertion,  made 
by  one  party  to  the  other,  before  or  at  the  time  of  the  contract,  of 
some  matter  or  circumstance  relating  to  it.  Though  it  is  sometimes 
contained  in  the  written  instrument,  it  is  not  an  integral  part  of  the 
contract ;  and,  consequently,  the  contract  is  not  broken  though  the 
representation  proves  to  be  untrue;  nor,  (with  the  exception  of  the 
case  of  policies  of  insurance,  at  all  events  marine  policies,  which  stand 
on  a  peculiar  anomalous  footing)  is  such  untruth  any  cause  of  action, 
nor  has  it  any  efficacy  whatever,  unless  the  representation  was  made 
fraudulently,  either  by  reason  of  its  being  made  with  a  knowledge 
of  its  untruth,  or  by  reason  of  its  being  made  dishonestly,  with  a 
reckless  ignorance  whether  it  was  true  or  untrue. 

If  this  be  so,  it  is  difficult  to  understand  the  distinction  which 
is  to  be  found  in  some  of  the  treatises,  and  is  in  some  degree  per- 
haps sanctioned  by  judicial  authority,  that  a  representation,  if  it 
differs  from  the  truth  to  an  unreasonable  extent,  may  affect  the 
validity  of  the  contract.  Where,  indeed,  the  misrepresentation  is  so 
gross  as  to  amount  to  sufficient  evidence  of  fraud,  it  is  obvious  that 
the  contract  would  on  that  ground  be  voidable. 

The  representations  are  not  usually  contained  in  the  written 
instrument  of  contract,  yet  they  sometimes  are.  But  it  is  plain 
that  their  insertion  therein  cannot  alter  their  nature.  A  question, 
however,  may  arise,  whether  a  descriptive  statement  in  the  written 
instrument  is  a  mere  representation,  or  whether  it  is  a  substantive 
part  of  the  contract.  This  is  a  question  of  construction  which  the 
court,  and  not  the  jury,  must  determine.  If  the  court  should  come 
to  the  conclusion  that  such  a  statement  by  one  party  was  intended 
to  be  a  substantive  part  of  his  contract,  and  not  a  mere  representa- 
tion, the  often-discussed  question  may,  of  course,  be  raised,  whether 
this  part  of  the  contract  is  a  condition  precedent,  or  only  an  inde- 
pendent agreement,  a  breach  of  which  will  not  justify  repudiation  of 
the  contract,  but  will  only  be  a  cause  of  action  for  a  compensation 
in  damages.  In  the  construction  of  charter  parties,  this  question 
has  often  been  raised,  with  reference  to  stipulations  that  some  future 
thing  shall  be  done  or  shall  happen,  and  has  given  rise  to  many  nice 
distinctions.  Thus,  a  statement  that  a  vessel  is  to  sail,  or  be  ready 
to  receive  a  cargo,  on  or  before  a  given  day,  has  been  held  to  be 
a  condition,  while  a  stipulation  that  she  sliall  sail  with  all  convenient 
speed,  or  within  a  reasonable  time,  has  been  held  to  be  only  an 
agreement.  But  with  respect  to  statements  in  a  contract  descriptive 
of  the  subject-matter  of  it.  or  of  some  material  incident  thereof,  the 
true  doctrine,  established  by  principle  as  well  as  authority,  appears 
to  be,  generally  speaking,  that  if  such  descriptive  statement  was 
intended  to  be  a  substantive  part  of  the  contract,  it  is  to  be  regarded 


FORMATION    OF    CONTRACTS  1 29 

as  a  warranty,  that  is  to  say,  a  condition  on  the  failure  or  non- 
performance of  which  the  other  party  may,  if  he  is  so  minded,  repu- 
diate the  contract  in  toto,  and  so  be  relieved  from  performing  his 
part  of  it,  provided  it  has  not  been  partially  executed  in  his  favor. 
If,  indeed,  he  has  received  the  whole  or  any  substantial  part  of  the 
consideration  for  the  promise  on  his  part,  the  warranty  loses  the 
character  of  a  condition,  or,  to  speak  perhaps  more  properly,  ceases 
to  be  available  as  a  condition,  and  becomes  a  warranty  in  the  nar- 
rower sense  of  the  word — viz.,  a  stipulation  by  way  of  agreement, 
for  the  breach  of  which  a  compensation  must  be  sought  in  damages. 
The  question  on  the  present  charter  party  is  confined  to  the 
statement  of  a  definite  fact — the  place  of  the  ship  at  the  date  of  the 
contract.  Now  the  place  of  the  ship  at  the  date  of  the  contract, 
where  the  ship  is  in  foreign  parts  and  is  chartered  to  come  to  Eng- 
land, may  be  the  only  datum  on  which  the  charterer  can  found  his 
calculations  of  the  time  of  the  ship's  arriving  at  the  port  of  load- 
ing. A  statement  is  more  or  less  important  in  proportion  as  the  ob- 
ject of  the  contract  more  or  less  depends  upon  it.  For  most  charters, 
considering  winds,  markets,  and  dependent  contracts,  the  time  of 
a  ship's  arrival  to  load  is  an  essential  fact,  for  the  interest  of  the 
charterer.  In  the  ordinary  course  of  charters  in  general  it  would 
be  so :  the  evidence  for  the  defendant  shows  it  to  be  actually  so 
in  this  case.  Then,  if  the  statement  of  the  place  of  the  ship  is  a 
substantive  part  of  the  contract,  it  seems  to  us  that  we  ought  to 
hold  it  to  be  a  condition. 

3.     Misrepresentation  a  Ground  of  Relief  in  Equity. 

Drake  v.  Fairmont  Drain  Tile  &  Brick  Co.  I2g  Minn.  145. 

Drake  was  induced  to  subscribe  to  stock  of  the  Tile  Company, 
by  a  representation  that  the  land  of  the  company  contained  clay 
peculiarly  adapted  to  the  manufacture  of  tiles.  This  representa- 
tion was  made  by  the  officers  of  the  company  in  the  belief  that  it 
was  true,  but  it  was  in  fact  false. 

Held,  that  equity  will  grant  relief  against  a  misrepresentation 
innocently  made. 

Holt,  J. 

We  must  determine  whether  one  who  has  been  induced  by  the 
innocent,  but  material,  misrepresentations  of  another  to  enter  a 
contract  with  the  latter  is  without  remedy.  When  the  one  deceived 
asks  for  no  more  than  to  return  what  he  got,  and  get  back  what 
he  parted  with  in  the  deal,  it  would  seem,  at  first  blush,  that  courts 
of  justice,  whether  of  law  or  equity,  should  be  more  favorably 
inclined  to  him  than  to  the  one  who  admits  that  he  caused  the 
deception,  but  offers  the  excuse  that,  when  he  was  guilty  thereof, 
he  believed  in  good  faith  that  he  represented  the  facts  truly.     The 


130  COMMERCIAL    LAW    CASES 

real  injury  to  the  one  deceived  is  not  lessened  in  the  slightest  by 
the  knowledge,  motives  or  state  of  mind  of  the  one  who  made 
the  misrepresentations. 

In  an  action  in  equity  to  rescind,  the  claim  of  a  defendant 
that  he  made  the  false  representations  believing,  in  good  faith,  that 
they  were  true,  is  of  no  avail.  To  entitle  a  party  to  relief  in  equity 
by  reason  of  fraudulent  representations,  it  is  not  necessary  that 
it  be  shown  that  the  party  making  the  false  statements  knew  that 
they  were  false  when  he  made  them.  They  may  have  been  inno- 
cently made,  yet,  if  represented  as  positive  statement  of  facts,  as 
distinguished  from  mere  opinions,  and  relied  upon  by  the  other  party 
to  his  prejudice  to  the  extent  that  he  is  led  to  act  thereon,  equity  will 
afford  relief.  It  can  make  no  difference  in  this  immediate  connec- 
tion whether  the  representation  as  made  was  wittingly  or  unwittingly 
false  and  untrue.  In  such  cases  scienter  is  not  of  importance.  Nearly 
all  the  cases  upon  which  the  petitioner  relies  are  cases  in  equity 
of  rescission  or  equitable  estoppel  in  which  bad  faith  is  never 
indispensable  as  an  element. 

We  think  the  question  has  been  determined  in  this  state  by 
Martin  v.  Hill,  41  Minn.  337,  an  action  to  rescind  the  purchase  of 
shares  of  stock  because  induced  by  false  representations.  Therein 
Chief  Justice  Gilfillan  states:  "That  one  who,  making  a  purchase, 
does  not  get  by  it  substantially  what,  from  the  false  representa- 
tions of  the  vendor  as  to  material  facts,  he  had  a  right  to  believe, 
and  does  believe  he  is  purchasing,  may  have  a  rescission  of  the 
contract  of  purchase,  if  he  is  guilty  of  no  laches,  is  beyond  question. 
It  would  be  the  grossest  injustice  to  hold  a  party  to  a  purchase,  where, 
solely  through  the  fault  of  the  other  party,  he  gets  only  what  he 
did  not  intend  to  buy.  And  to  this  right  of  rescission  it  is  not  essen- 
tial that  the  false  representations  were  made  with  actual  intent  to 
defraud.  The  right  is  not  based  upon  actual  fraud,  but  on  a  mate- 
rial mistake  of  facts  caused  by  the  fault  of  the  other  party."  The 
false  representation  having  been  made,  it  becomes  immaterial,  from 
a  legal  view,  whether  the  defendant  made  it  innocently  or  corruptly, 
if  the  plaintiff,  relying  thereon,  was  in  fact  misled  to  his  injury. 
In  either  case  it  works  a  fraud  on  plaintiff. 

4.    Misrepresentation  by  One  in  Confidential  Relationship. 

Butler  V.  Glcasun.  214  Mass.  248. 

Dr.  Gleason,  the  plaintifif's  physician,  negligently  injured  her 
by  causing  a  collision  with  the  carriage  he  was  driving.  He  pro- 
cured a  release  from  her  upon  his  assurance  that  she  would  be 
restored  to  health.  She  now  sues  for  the  negligence,  attempting 
to  set  aside  the  release. 

Held,  that  wlien  persons  are  in  a  confidential  relationship,  abuse 
of  that  relationship  is  to  be  inferred  from  misrepresentation. 


FORMATION    OF    CONTRACTS  I3I 


Braley,  J. 

The  defendant  maintains  that  the  representation  was  merely 
an  encouraging  statement  not  intended  as  anything  more  than  the 
expression  of  a  hopeful  expectation,  which  does  not  constitute  action- 
able deceit.  But  the  relation  of  a  physician  to  his  patient  is  neces- 
sarily one  of  trust  and  confidence,  and  commercial  transactions  be- 
tween them  where  fraud  or  undue  influence  is  charged,  are  viewed  by 
the  courts  with  some  jealousy,  and  are  carefully  scrutinized.  If 
he  solicits  and  procures  a  conveyance  to  himself  of  the  property 
of  his  patient,  whether  by  way  of  gift  or  of  purchase,  the  burden, 
where  the  good  faith  of  the  transaction  is  attacked,  rests  upon 
him  to  show  that  the  patient's  confidence  has  not  been  abused,  and 
that  undue  influence  has  not  been  exerted.  It  is  not  sufficient  that 
the  patient  knew  what  he  was  doing,  but  the  question  is  how  the 
intention  was  produced. 


5.     Elements  of  Fraud. 

Southern  Development  Co.  v.  Silva.  12^  U.  S.  24^. 

The  Development  Company  boiight  a  mine  from  Silva,  on  his 
representations  of  value  and  opinion  as  to  ore  content.  The 
representations  turned  out  to  be  false,  and  the  company  asserts 
the  right  to  have  the  sale  set  aside. 

Held,  that  such  representations  do  not  justify  rescission  of 
the  contract  on  the  ground  of  fraud. 

Lamar,  J. 

The  burden  of  proof  is  on  the  complainant ;  and  unless  he  brings 
evidence  sufficient  to  overcome  the  natural  presumption  of  fair 
dealing  and  honesty,  a  court  of  equity  will  not  be  justified  in  setting 
aside  a  contract  on  the  ground  of  fraudulent  representations.  In 
order  to  establish  a  charge  of  this  character  the  complainant  must 
show  by  clear  and  decisive  proof — 

First.  That  the  defendant  has  made  a  representation  in 
regard  to  a  material  fact ; 
Secondly.  That  such  representation  is  false ; 
Thirdly.  That  such  representation  was  not  actually  be- 
lieved by  the  defendant,  on  reasonable  grounds,  to  be  true ; 
Fourthly.  That  it  was  made  with  intent  that  it  should  be 
acted  on; 

Fifthly.    That  it  was  acted  on  by  complainant  to  his  damage; 
and, 

Sixthly.    That  in  so  acting  on  it  the  complainant  was  igno- 
rant of  its   falsity,  and  reasonably  believed   it  to  be  true. 


132  COMMERCIAL    LAW    CASES 

The  first  of  the  foregoing  requisites  excludes  such  statements 
as  consist  merely  in  an  expression  of  an  opinion  or  judgment,  hon- 
estly entertained;  and,  again,  (excepting  in  peculiar  cases,)  it  ex- 
cludes statements  by  the  owner  and  vendor  of  property  in  respect 
to  its  value. 

Any  statements  that  may  have  been  made  by  Silva  with  refer- 
ence to  the  value  of  the  mine,  cannot,  under  the  circumstances  of 
this  case,  be  considered  an  act  of  fraud  on  his  part  sufficient  to 
warrant  a  court  of  equity  in  setting  aside  the  contract  herein.  Yer- 
ington  testifies  that  Silva  said  he  had  been  asking  $15,000  for 
the  mine,  but  that  he  would  take  $12,500;  while  Forman  says  he  does 
not  recollect  that  Silva  made  any  statement  as  to  the  value  of  the 
mine,  but  that  he  heard  Silva  say  he  thought  it  was  worth  $15,000. 
Such  statements  are  not  fraudulent  in  law,  but  are  considered  merely 
as  trade  talk,  and  mere  matters  of  opinion,  which  is  allowable. 

6.     Promissory  Misrepresentation  of  Fact. 

Dawe  V.  Morris.  14P  Mass.  188. 

Dawe  was  induced  to  enter  into  a  contract  to  build  thirty  miles 
of  the  Florida  Midland  Railway,  by  false  representations  of  Mor- 
ris that  he  had  already  purchased  a  certain  quantity  of  rails  at  a 
certain  price,  and  would  sell  them  to  Dawe  at  that  price  if 
Morris  would  make  the  contract.  Dawe  sues  for  deceit,  a  tort 
action  which  requires  the  same  elements  of  fraud  that  justify 
rescission  of  a  contract. 

Held,  that  there  was  no  representation  of  a  material  existing 
fact. 

Devens,  J. 

A  representation,  in  order  that,  if  material  and  false,  it  may 
form  the  ground  of  an  action  where  one  has  been  induced  to  act  by 
reason  thereof,  should  be  one  of  some  existing  fact.  A  statement 
promissory  in  its  character  that  one  will  thereafter  sell  goods  at  a 
particular  price  or  time,  will  pay  money,  or  do  any  similar  thing, 
or  any  assurance  as  to  what  shall  thereafter  be  done,  or  as  to 
any  further  event,  is  not  properly  a  representation,  but  a  contract, 
for  the  violation  of  which  a  remedy  is  to  be  sought  by  action  thereon. 
The  statement  by  the  defendant  that  he  would  thereafter  sell  rails 
at  a  particular  price  if  the  plaintiff  would  contract  with  the  railway 
company  was  a  promise,  the  breach  of  which  has  occasioned  the  injury 
to  the  plaintiff. 

The  plaintiff  contends  that,  even  if  this  is  so,  the  representa- 
tion that  the  defendant  had  thus  purchased  the  rails  at  the  price 
named  was  material  and  false;  but  if  the  allegation  that  the  defend- 
ant had  purchased  the  rails  be  separated  from  that  of  the  promise 
to  sell  them  to  the  plaintiff,  it  is  seen  at  once  to  be  quite  unimportant 


FORMATION  OF  CONTRACTS  I33 

and  immaterial.  Had  the  defendant  actually  sold,  or  had  he  been 
ready  to  sell,  the  rails  at  the  time  and  price  he  promised  that  he 
would,  no  action  could  have  been  maintained  by  reason  of  any  false 
representation  that  he  had  purchased  them  when  he  made  his  prom- 
ise, and  no  possible  injury  could  thereby  have  resulted  to  the 
plaintiff. 

In  order  that  a  false  representation  may  form  the  foundation 
of  an  action  of  deceit,  it  must  be  as  to  some  subject  material  to  the 
contract  itself.  If  it  merely  affects  the  probability  that  it  will  be 
kept,  it  is  collateral  to  it. 

7.    Misrepresentation  of  Intention  as  Fact. 

Edging  ton  v.  Fitzmaurice.  L.  R.  2Q  Ch.  D.  (Eng.)  4^p. 

Edgington  bought  bonds  of  a  company,  relying  upon  a  prospec- 
tus issued  in  its  behalf  by  the  defendants,  which  stated  that  the 
purpose  of  the  issue  was  to  develop  the  business.  In  fact,  the 
issue  was  for  the  purpose  of  paying  off  existing  obligations. 
This  action  is  brought  by  Edgington  for  repayment  of  his  money. 

Held,  that  a  statement  of  intention  is  a  representation  of  fact. 

Bowen,  L.  J. 

This  is  an  action  for  deceit,  in  which  the  plaintiff  complains 
that  he  was  induced  to  take  certain  debentures  by  the  misrepresenta- 
tions of  the  defendants,  and  that  he  sustained  damage  thereby.  The 
loss  which  the  plaintiff  sustained  is  not  disputed.  In  order  to  sus- 
tain his  action  he  must  first  prove  that  there  was  a  statement  as  to 
facts  which  was  false ;  and  secondly,  that  it  was  false  to  the  knowl- 
edge of  the  defendants,  or  that  they  made  it  not  caring  whether 
it  was  true  or  false.  For  it  is  immaterial  whether  they  made  the 
statement  knowing  it  to  be  untrue,  or  recklessly,  without  caring 
whether  it  was  true  or  not,  because  to  make  a  statement  recklessly 
for  the  purpose  of  influencing  another  person  is  dishonest.  It  is 
also  clear  that  it  is  wholly  immaterial  with  what  object  the  lie  is 
told.  But  it  is  material  that  the  defendant  should  intend  that  it 
should  be  relied  on  by  the  person  to  whom  he  makes  it.  But,  lastly, 
when  you  have  proved  that  the  statement  was  false,  you  must  further 
show  that  the  plaintiff  has  acted  upon  it  and  has  sustained  damage 
by  so  doing:  you  must  show  that  the  statement  was  either  the  sole 
cause  of  the  plaintiff's  act,  or  materially  contributed  to  his  so  acting. 

The  objects  for  which  the  money  was  to  be  raised  were  stated 
to  be  to  complete  the  alterations  and  additions  to  the  buildings, 
to  purchase  horses  and  vans,  and  to  develop  the  supply  of  fish. 
A  mere  suggestion  of  possible  purposes  to  which  a  portion  of  the 
money  might  be  applied  would  not  have  formed  a  basis  for  an  action 
of  deceit.  There  must  be  a  misstatement  of  an  existing  fact:  but 
the  state  of  a  man's  mind  is  as  much  a  fact  as  the  state  of  his 


134  COMMERCIAL   LAW    CASES 

digestion.  It  is  true  that  it  is  very  difficult  to  prove  what  the 
state  of  a  man's  mind  at  a  particular  time  is,  but  if  it  can  be  as- 
certained it  is  as  much  a  fact  as  anything  else.  A  misrepresenta- 
tion as  to  the  state  of  a  man's  mind  is,  therefore,  a  misstatement 
of  fact.  Having  applied  as  careful  consideration  to  the  evidence 
as  I  could,  I  have  reluctantly  come  to  the  conclusion  that  the  true 
objects  of  the  defendants  in  raising  the  money  were  not  those  stated 
in  the  circular.  I  will  not  go  through  the  evidence,  but  looking 
only  to  the  cross-examination  of  the  defendants,  I  am  satisfied 
that  the  objects  for  which  the  loan  was  wanted  were  misstated  by 
the  defendants,  I  will  not  say  knowingly,  but  so  recklessly  as  to  be 
fraudulent  in  the  eye  of  the  law. 

8.     Misrepresentation  by  Concealment. 

Stewart  v.  Wyoming  Cattle  Ranche  Co.  128  U.  S.  s^3- 

The  Ranche  Company  bought  a  herd  of  cattle  from  Stewart, 
who  prevented  the  purchasing  agent  from  making  inquiries  on 
his  own  account  as  to  the  truth  of  the  Ranche  Company's  repre- 
sentation regarding  the  number  of  calves  branded.  These  in- 
quiries would  have  revealed  the  fact  that  many  of  the  cattle  had 
recently  been  lost.  The  Ranche  Company  sues  in  tort  for  deceit, 
instead  of  attempting  to  rescind  the  contract. 

Held,  that  a  misrepresentation  may  be  made  by  concealment  of 
a  material  fact,  as  well  as  by  actual  falsehood. 

Gray,  J. 

It  is  true  that  silence  as  to  a  material  fact  is  not  necessarily, 
as  matter  of  law,  equivalent  to  a  false  representation.  But  mere 
silence  is  quite  different  from  concealment ;  a  suppression  of  the 
truth  may  amount  to  a  suggestion  of  falsehood ;  and  if,  with  intent 
to  deceive,  either  party  to  a  contract  of  sale  conceals  or  suppresses 
a  material  fact,  which  he  is  in  good  faith  bound  to  disclose,  this 
is  evidence  of  and  equivalent  to  a  false  representation,  because  the 
concealment  or  suppression  is  in  effect  a  representation  that  what  is 
disclosed  is  the  whole  truth.  The  gist  of  the  action  is  fraudulently 
producing  a  false  impression  upon  the  mind  of  the  other  party ;  and 
if  this  result  is  accomplished,  it  is  unimportant  whether  the  means 
of  accomplishing  it  are  words  or  acts  of  the  defendant,  or  his  con- 
cealment or  suppression  of  material  facts  not  equally  within  the 
knowledge  or  reach  of  the  plaintiff. 

In  an  action  by  the  buyer  of  tobacco  against  the  sellers  to  re- 
cover possession  of  it,  there  was  evidence  that  before  the  sale  the 
buyer,  upon  being  asked  by  Girault,  one  of  the  sellers,  whether 
there  was  any  news  which  was  calculated  to  enhance  its  price  or 
value,  was  silent,  although  he  had  received  news,  which  the  seller 
had  not,  of  the  Treaty  of  Ghent.    The  court  below,  "there  being  no 


FORMATION    OF    CONTRACTS  I35 

evidence  that  the  plaintiff  had  asserted  or  suggested  anything  to 
the  said  Girault,  calculated  to  impose  upon  him  with  respect  to  the 
said  news,  and  to  induce  him  to  think  or  believe  that  it  did  not 
exist,"  directed  a  verdict  for  the  plaintiff.  Upon  a  bill  of  ex- 
ceptions to  that  direction,  this  court,  in  an  opinion  delivered  by- 
Chief  Justice  Marshall,  held  that  while  it  could  not  be  laid  down, 
as  a  matter  of  law,  that  the  intelligence  of  extrinsic  circumstances 
which  might  influence  the  price  of  the  commodity,  and  which  was  ex- 
clusively within  the  knowledge  of  the  vendee,  ought  to  have  been 
communicated  by  him  to  the  vendor,  yet  at  the  same  time,  each  party 
must  take  care  not  to  say  or  do  anything  tending  to  impose  upon  the 
other,  and  that  the  absolute  instruction  of  the  judge  was  erroneous, 
and  the  question  whether  any  imposition  was  practised  by  the  vendee 
upon  the  vendor  ought  to  have  been  submitted  to  the  jury. 

The  instructions  excepted  to  in  the  case  at  bar  clearly  af- 
firmed the  same  rule.  The  words  and  conduct  relied  on  as  amounting 
to  false  representations  were  those  of  the  seller  of  a  large  herd  of 
cattle  ranging  over  an  extensive  territory,  and  related  to  the  number 
of  the  herd  itself,  of  which  he  had  full  knowledge,  or  means  of 
information,  not  readily  accessible  to  a  purchaser  coming  from 
abroad;  and  the  plaintiff  introduced  evidence  tending  to  show  that 
the  defendant,  while  going  over  the  ranch  with  the  plaintift''s  agent, 
made  positive  false  representations  as  to  the  number  of  calves 
branded  during  the  year,  and  also  fraudulently  prevented  him  from 
procuring  other  information  as  to  the  number  of  calves  and  conse- 
quently as  to  the  number  of  cattle  on  the  ranch. 

9.     Knowledge  of  Falsity. 

Litchfield  v.  Hutchinson.  117  Mass.  195. 

Hutchinson",  in  selling  a  horse,  falsely  represented  to  Litch- 
field, the  buyer,  that  it  was  sound,  when  in  fact  it  was  not  sound. 
Litchfield  sues  for  deceit. 

Held,  according  to  the  Massachusetts  rule,  that  a  false  state- 
ment as  of  one's  own  knowledge,  of  a  fact  susceptible  of  knowl- 
edge, is  fraudulent. 

Morton,  J. 

To  sustain  such  an  action  it  is  necessary  for  the  plaintiff  to 
prove  that  the  defendant  made  false  representations,  which  were 
material,  with  a  view  to  induce  the  plaintiff  to  purchase,  and  that 
the  plaintiff  was  thereby  induced  to  purchase.  But  it  is  not  al- 
ways necessary  to  prove  that  the  defendant  knew  that  the  facts 
stated  by  him  were  false.  If  he  states,  as  of  his  own  knowledge, 
material  facts  susceptible  of  knowledge,  which  are  false,  it  is  a  fraud 
which  renders  him  liable  to  the  party  who  relies  and  acts  upon  the 
Statement  as  true,  and  it  is  no  defense  that  he  believed  the  facts 


I3t>  COMMERCIAL    LAW    CASES 

to  be  true.  The  falsity  and  fraud  consist  in  representing  that  he 
knows  the  facts  to  be  true,  of  his  own  knowledge,  when  he  has  not 
such  knowledge. 

If  the  defect  in  the  horse  was  one  which  might  have  been  known 
by  reasonable  examination,  it  was  a  matter  susceptible  of  knowledge 
and  a  representation  by  the  defendant  made  as  of  his  own  knowledge 
that  such  defect  did  not  exist,  would,  if  false,  be  a  fraud  for  which 
he  would  be  liable  to  the  plaintiff,  if  made  with  a  view  to  induce 
him  to  purchase,  and  if  relied  on  by  him. 

10.     Intention  that  Other  Party  Act. 

Wells  V.  Cook.  16  Oh.  St.  67. 

Cook  sold  diseased  sheep  to  Osmund  Wells,  representing  them 
to  be  sound.  Osmund,  not  knowing  their  condition,  sold  them  to 
Orlando  Wells,  who  made  the  original  purchase  for  Osmund  rely- 
ing on  the  truth  of  Cook's  representations,  and  who  now  sues 
Cook. 

Held,  that  there  was  no  intention  that  the  plaintiff  should  act 
upon  the  representation. 

Brinkerhoff,  C.  J. 

If  A  fraudulently  makes  a  representation  which  is  false,  and 
which  he  knows  to  be  false,  to  B,  meaning  that  B  shall  act  upon  it, 
and  B,  believing  it  to  be  true,  does  act  upon  it,  and  thereby  suffers 
a  damage,  B  may  maintain  an  action  on  the  case  for  deceit.  We 
have  been  able  to  find  no  case  which  transcends  the  limit  thus  de- 
fined— no  case  which  purports  to  hold,  or  is  decided  on  the  principle, 
that  if  A  makes  a  false  and  fraudulent  representation  to  B,  mean- 
ing that  C,  and  C  alone,  shall  act  upon  it,  and  B  thereupon  assumes 
to  act  upon  it,  and  suffers  damage,  B  can  maintain  an  action  against 
A  for  the  deceit.  And  as  transactions  of  the  kind  last  supposed 
must  be  of  frequent  occurrence  in  every  commercial  country,  the 
fact  that  no  such  case  can  be  found,  is  strong  evidence  that  such  a 
doctrine  is  unknown  to  the  law.  And  the  case  last  above  supposed,  is, 
really,  the  case  before  us.  The  representations  complained  of  were 
not  made  to  the  plaintiff,  meaning  that  the  plaintiff  should  act  upon 
them  in  any  manner  or  matter  affecting  his  own  interests,  but  were 
made  to  the  plaintiff,  acting  as  the  avowed  agent  of  his  brother,  simply 
in  a  representative  capacity,  meaning  that  the  brother  should  act 
upon  them ;  and  the  fact  that  the  brother  was  meant  to  act  upon 
them,  through  the  plaintiff,  as  his  agent,  cannot,  it  seems  to  us,  alter 
the  case  in  any  legal  aspect. 

It  was  held,  that  a  dealer  in  drugs  and  medicines,  who  carelessly 
labels  a  deadly  poison  as  a  harmless  medicine,  and  sends  it,  so  labelled, 
into  market,  is  liable  to  all  persons,  who,  without  fault  on  their 
part,  are  injured  by  using  it  as  such  medicine  in  consequence  of  the 


FORMATION    OF    CONTRACTS  137 

false  label,  and  this,  though  the  poisonous  drug  with  such  label  may 
have  passed  through  many  intermediate  sales  before  it  reaches  the 
hands  of  the  person  injured.  In  that  case  the  article  sold  purported 
to  be  a  medicine,  was  intended  for  retail  in  minute  quantities,  and 
to  be  administered  in  doses  to  a  great  number  of  persons.  And  the 
court  regarded  the  accompanying  label  as  a  continuous  representation 
to,  and  intended  to  be  acted  on  by,  whomsoever  it  might  concern, 
that  the  article  was  what  its  label  purported.  In  these  particulars, 
and  others,  the  case  differs  from  that  before  us,  and  falls  short  of 
being  conclusive  of  it,  if  the  case  be  accepted  as  authority. 

The  influences  of  human  conduct,  good  or  bad,  are  far-reaching, 
and  are  often  seen  and  felt  in  consequences  exceedingly  remote, 
but  uncertain  and  complicated.  It  is  simply  impossible  that  munic- 
ipal law  should  take  cognizance  of  all  these  consequences.  From 
necessity,  a  large  share  of  them  must  be  left  to  the  jurisdiction  of 
public  opinion,  individual  conscience,  and,  finally,  to  the  retribu- 
tions of  another  world.  There  must,  somewhere,  be  fixed  a  limit 
between  the  near  and  remote,  direct  and  indirect  consequences, 
beyond  which  the  law  will  not  take  cognizance  of  them.  And  in  this 
case  we  are  satisfied  that  one  of  the  prescribed  limits  is  this — 
that  the  false  and  fraudulent  representations  must  have  been  intended 
to  be  acted  on,  in  a  matter  affecting  himself,  by  the  party  who 
seeks  redress  for  consequential  injuries.  If  this  limit  is  to  be  ex- 
tended, it  must  be  the  work  of  the  legislature. 

II.    Action  by  Other  Party. 

Mabardy  v.  McHugh.  202  Mass.  148. 

The  plaintififs  went  upon  land  sold  them  by  the  defendant,  who 
pointed  out  the  true  boundaries,  but  stated  that  the  acreage  was 
much  larger  than  was  actually  the  case.  The  plaintiffs  affirmed 
the  sale,  but  sue  in  tort  for  deceit. 

Held,  that  a  misrepresentation  of  acreage  of  property  is  not  a 
misrepresentation  of  fact  which  justifies  avoidance  of  the  contract. 

Ritgg,  J. 

If  the  point  were  now  presented  for  the  first  time,  it  is  possi- 
ble that  we  might  be  convinced  by  the  argument  of  the  plaintiffs 
and  the  great  weight  of  persuasive  authority  in  its  support.  But 
there  is  something  to  be  said  in  support  of  two  earlier  decisions 
now  questioned.  A  purchase  and  a  sale  of  real  estate  is  a  transaction 
of  importance,  and  cannot  be  treated  as  entered  into  lightly.  Peo- 
ple must  use  their  own  faculties  for  their  protection  and  informa- 
tion, and  cannot  assume  that  the  law  will  relieve  them  from  the 
natural  effects  of  their  heedlessness,  or  take  better  care  of  their 
interests  than  they  themselves  do.  Thrift,  foresight  and  self-reliance 
would  be  undermined  if  it  was  the  policy  of  the  law  to  attempt  to 


138  COMMERCIAL    LAW    CASES 

afford  relief  for  mere  want  of  sagacity.  It  is  an  ancient  and  widely, 
if  not  universally,  accepted  principle  of  the  law  of  deceit  that, 
where  representations  are  made  respecting  the  subject  as  to  which  the 
complaining  party  has  at  hand  reasonably  available  means  for  ascer- 
taining the  truth  and  the  matter  is  open  to  inspection,  if,  without 
being  fraudulently  diverted  therefrom,  he  does  not  take  advantage 
of  this  opportunity,  he  cannot  be  heard  to  impeach  the  transaction 
on  the  ground  of  the  falsehoods  of  the  other  parties.  This  rule  in 
its  general  statement  applies  to  such  a  case  as  that  before  us.  It  is 
easy  for  one  disappointed  in  the  fruits  of  a  trade  to  imagine,  and 
perhaps  persuade  himself,  that  the  cause  of  his  loss  is  the  deceit 
of  the  other  party,  rather  than  his  own  want  of  judgment. 

It  is  highly  desirable  that  laws  for  conduct  in  ordinary  affairs, 
in  themselves  easy  of  comprehension  and  memory,  when  once  estab- 
lished, should  remain  fast.  The  doctrine  of  stare  decisis  is  as  salutary 
as  it  is  well  recognized. 

12.     Damage. 

Randall  v.  Hazelton.  12  Allen  {Mass.)  412. 

Randall  owned  property  mortgaged  to  an  insurance  company, 
which,  after  the  mortgage  had  become  overdue,  promised  to  notify 
Randall  in  ample  time  when  it  wanted  payment.  The  defendants 
obtained  an  assignment  of  the  mortgage  by  falsely  representing 
to  the  insurance  company  that  Randall  so  desired.  They  then 
foreclosed.  Randall  sues  for  their  false  representation  to  the 
company. 

Held,  that  as  the  plaintiff  was  bound  to  pay  the  mortgage,  he 
was  not  damaged. 

Colt,  J. 

The  question  raised  by  the  demurrer  is  whether,  upon  the  facts 
charged,  the  action  can  be  maintained.  It  is  an  ancient  and  well 
established  legal  principle  that  fraud  without  damage  or  damage 
without  fraud  gives  no  cause  of  action ;  yet  when  the  two  do  concur, 
there  an  action  lieth.  Actions  like  the  one  under  consideration 
are  all  based  upon  this  proposition ;  but  it  cannot  safely  be  applied 
as  a  test  by  which  to  determine  whether  the  facts  in  any  case  con- 
stitute an  actionable  wrong,  without  keeping  in  mind  the  meaning 
which  the  law,  by  a  series  of  judicial  decisions,  has  attached  to  the 
terms  used.  It  is  well  settled  that  every  falsehood  is  not  necessarily 
a  legal  fraud  or  false  representation.  It  is  said  that  a  false  rep- 
resentation is  an  affirmation  of  that  which  the  party  knows  to  be 
false  or  does  not  know  to  be  true,  to  another's  loss  or  his  own  gain. 
So  in  reference  to  the  term  damage,  the  law  is  that  it  must  be  a  loss 
brought  upon  the  party  complaining  by  a  violation  of  some  legal 
ri^iit,  or   it   will    be   considered   as   merely   chunnnm   absque   injuria. 


FORMATION    OF    CONTRACTS  139 

There  is  a  large  class  of  moral  rights  and  duties,  sometimes  called 
imperfect  rights  and  obligations,  which  the  law  does  not  attempt  to 
enforce  or  protect.  The  refusal  or  discontinuance  of  a  favor  gives 
no  cause  of  action.  If  one  trusts  to  a  mere  gratuitous  promise  of 
favor  from  another  and  is  disappointed,  the  law  will  not  protect  him 
from  the  consequence  of  his  undue  confidence,  nor  encourage  care- 
lessness or  want  of  prudence  in  affairs.  Damages  can  never  be 
recovered  where  they  result  from  a  lawful  act  of  the  defendant. 
The  exercise  of  a  right  conferred  by  a  valid  contract,  in  the  manner 
provided  by  its  terms,  cannot  be  the  ground  of  an  action.  The  law 
will  not  inquire  into  the  motives  of  the  party  exercising  such  right, 
however  unfriendly  and  selfish.  The  trouble  and  expense  and  risk 
of  loss  ought  to  and  must  be  presumed  to  have  been  contemplated 
when  the  contract  was  entered  into.  The  foreclosure  of  a  mortgage 
under  a  power  of  sale,  for  example,  may  be  made  at  such  time  and 
under  such  circumstances  as  to  cause  great  distress  and  sacrifice 
to  the  mortgagor;  but,  whatever  the  motive  of  the  mortgagee,  no 
remedy  is  afforded  for  his  oppressive  conduct,  if  the  requirements 
of  the  contract  have  been  fulfilled. 

But  a  more  important  consideration  in  this  connection  is,  that 
the  damage  which  this  doctrine  contemplates  must  not  only  be  caused 
by  the  fraud  and  misconduct  of  the  defendant,  but  it  must  be  the 
direct  and  immediate  consequence  of  the  wrongful  act.  The  law  looks 
to  the  proximate  and  not  the  remote  cause  of  the  injury.  "It 
were  infinite,"  says  Lord  Bacon,  "to  consider  the  causes  of  causes 
and  their  impulsion  of  each  other;  therefore  it  contenteth  itself 
with  the  immediate  cause,  and  judgeth  of  acts  by  that,  without 
looking  to  any  further  degree."  This  is  the  only  practical  rule 
which,  in  view  of  the  complication  which  surrounds  this  doctrine 
of  causation,  can  be  adopted  in  the  administration  of  justice  by 
human  tribunals.  Where  the  fraud  and  damage  sustain  this  intimate 
relation  of  proximate  cause  and  effect,  and  not  otherwise,  they  are 
said  to  concur  in  the  sense  of  the  proposition  above  stated. 

Applying  the  doctrine  thus  explained  to  the  plaintiff's  case, 
we  are  of  opinion  that  he  sets  forth  no  legal  cause  of  action.  The 
declaration  shows  no  consideration  for  the  alleged  promise  of  the 
mortgagees  to  inform  the  plaintiff,  in  case  the  amount  of  the  debt 
should  be  wanted  by  them.  It  was  an  agreement  not  legally  binding 
upon  them.  There  was  nothing  in  it  to  prevent  them  in  law  from 
proceeding  to  do  all  the  acts  in  relation  to  advertising  and  selling 
the  property  which  were  done  by  the  defendants;  nor  did  it  prevent 
them  from  assigning  the  mortgage.  It  cannot  be  said  to  be  an  inva- 
sion of  any  legal  right  for  the  defendants  to  deprive  the  plaintiff 
even  by  falsehood  of  the  benefit  of  this  gratuitous  undertaking. 

This  specific  act  of  obtaining  the  assignment  in  the  manner 
stated  in  itself  produced  no  direct  and  immediate  damage  to  the 
plaintiff.  The  damage  resulted  solely  from  the  foreclosure  and  forced 
sale  of  the  premises,  and  would  have  been  no  more  and  no  less  if  the 
mortgage  had  not  been  assigned,  and  the  mortgagees  had  pursued  pre- 


140  COMMERCIAL    LAW    CASES 

cisely  the  course  charged  upon  the  defendants  in  regard  to  the  sale. 
It  was  undoubtedly  a  necessary  step  in  order  that  the  defendants 
might  practise  the  alleged  oppression ;  but  it  was  not  the  immediate 
cause  of  the  injury.  The  substantial,  efficient  and  immediate  cause 
of  the  loss  to  the  plaintiff  was  the  foreclosure  and  sale.  And  we 
are  not  permitted  to  go  behind  and  inquire  into  the  antecedent 
causes,  near  or  remote, 

13.     Effect  of  Fraud. 

Rowley  v.  Bigelow.  12  Pick.   (Mass.)  jo6. 

Rowley  sold  corn  to  Martin,  who  fraudulently  obtained  it 
while  he  was  insolvent  without  intending  to  pay  for  it.  Martin 
sold  and  shipped  the  goods  to  the  defendant,  Bigelow.  Rowley 
now  seeks  to  set  aside  the  sale. 

Held,  that  the  effect  of  a  sale  of  goods  procured  by  fraud  is 
to  vest  a  voidable  title  in  the  vendee,  which  becomes  a  valid  title 
in  an  innocent  purchaser  for  value  from  the  fraudulent  vendee. 

Shaw,  C.  J. 

This  contract  and  delivery  were  sufficient  in  law  to  vest  the 
property  in  Martin,  and  make  a  good  title,  if  not  tainted  by  fraud. 
But  being  tainted  by  fraud,  as  between  the  immediate  parties,  the 
sale  was  voidable,  and  the  vendors  might  avoid  it  and  reclaim  their 
property.  But  it  depended  upon  them  to  avoid  it  or  not,  at  their 
election.  They  might  treat  the  sale  as  a  nullity  and  reclaim  their 
goods ;  or  affirm  it  and  claim  the  price.  And  cases  may  be  imagined, 
where  the  vendor,  notwithstanding  such  fraud  practised  on  him, 
might,  in  consequence  of  obtaining  security  by  attachment  or  other- 
wise, prefer  to  affirm  the  sale.  The  consequence  thereof  is,  that 
such  sale  is  voidable,  but  not  absolutely  void.  The  consent  of  the 
vendor  is  given  to  the  transfer,  but  that  consent  being  induced  by 
false  and  fraudulent  representations,  it  is  contrary  to  justice  and 
right  that  the  vendor  should  suffer  by  it,  or  that  the  fraudulent  pur- 
chaser should  avail  himself  of  it;  and  upon  this  ground,  and  for  the 
benefit  of  the  vendor  alone,  the  law  allows  him  to  avoid  it. 

The  difference  between  the  case  of  property  thus  obtained,  and 
property  obtained  by  felony,  is  obvious.  In  the  latter  case,  no  right 
either  of  property  or  possession  is  acquired  and  the  felon  can  con- 
vey none. 

We  take  the  rule  to  be  well  settled,  that  where  there  is  a  con- 
tract of  sale,  and  an  actual  delivery  pursuant  to  it,  a  title  to  the 
property  passes,  but  voidable  and  defeasible  as  between  the  vendor 
and  vendee,  if  obtained  by  false  and  fraudulent  representations. 
The  vendor  therefore  can  reclaim  his  ])roi)erty  as  against  the  vendee 
or  any  other  person  claiming  under  him  and  standing  ui)on  his  title, 
but  not  against  a  buna   fide  purchaser  without  notice  of  the   fraud. 


FORMATION    OF    CONTRACTS  I4I 

The  ground  of  exception  in  favor  of  the  latter  is,  that  he  purchased 
of  one  having  a  possession  under  a  contract  of  sale,  and  with  a  title 
to  the  property,  though  defeasible  and  voidable  on  the  ground  of 
fraud;  but  as  the  second  purchaser  takes  without  fraud  and  without 
notice  of  the  fraud  of  the  first  purchaser,  he  takes  a  title  freed 
from  the  taint  of  fraud. 


C.     Duress  and  Undue  Influence. 

I.     What  Constitutes  Duress, 

Galusha  v.  Sherman.   lo^  Wis.  26^. 

Sherman  bought  tainted  meat  from  Galusha  and  was  poisoned. 
His  attorney  forced  Galusha  and  his  wife  to  mortgage  their  farm 
for  $1,000  in  order  to  settle  the  claim  of  Sherman,  by  threatening 
to  prosecute  Galusha  criminally.  The  attorney  accompanied  these 
threats  with  demonstrations  of  violence  towards  Galusha  which 
put  him,  a  man  of  somewhat  w^eak  character,  in  fear. 

Held,  that  a  contract  entered  into  under  duress  is  voidable. 

Marshall,  J. 

Anciently,  duress  in  law  by  putting  in  fear  could  exist  only 
where  there  was  such  a  threat  of  danger  to  the  object  of  it  as  was 
deemed  sufficient  to  deprive  a  constant  or  courageous  man  of  his 
free  will,  and  the  circumstances  requisite  to  that  condition  were 
distinctly  fixed  by  law ;  that  is  to  say,  the  resisting  power  which  every 
person  was  bound  to  exercise  for  his  own  protection  was  measured, 
not  by  the  standard  of  the  individual  affected,  but  by  the  standard 
of  a  man  of  courage ;  and  those  things  which  would  overcome  a 
person,  assuming  that  he  was  a  prudent  and  constant  man,  were  not 
left  to  be  determined  as  facts  in  the  particular  case,  but  were  a  part 
of  the  law  itself. 

The  theories  advanced  by  appellants'  counsel  to  support  the 
claim  that  the  finding  as  regards  respondent  suffering  from  wrong- 
ful deprivation  of  his  will  power  at  the  time  he  made  the  papers  in 
controversy  is  not  warranted  by  the  evidence  are  [now]  unsound. 
Those  theories  are  :  ( i )  Oppression  does  not  constitute  duress  unless 
sufficient  to  overcome  the  will  of  a  person  of  ordinary  courage ; 
(2)  a  threat  to  arrest  a  person  for  an  offense  of  which  he  is  not 
guilty  does  not  constitute  duress;  (3)  a  threat  to  arrest  a  person 
on  a  charge  that  does  not  constitute  a  criminal  offense  does  not  con- 
stitute duress.  All  of  such  theories  have  some  support,  but  all  are 
out  of  harmony  with  the  real  foundation  principle  of  duress,  which 
is  that  it  is  the  condition  of  the  mind  of  the  wronged  person  at  the 
time  of  the  act  sought  to  be  avoided,  not  the  means  by  which  such 
condition  was  produced.    Such  theories  are  also  out  of  harmony  with 


142  COMMERCIAL    LAW    CASES 

the  theory  upon  which  duress  of  a  contracting  party  renders  the  con- 
tract voidable  as  to  him,  which  is  that  the  free  meeting  and  blend- 
ing of  the  minds  of  contracting  parties  are  requisite  to  a  binding 
contract. 

Early  in  the  development  of  the  law,  the  legal  standard  of  re- 
sistance that  a  person  was  bound  to  exercise  for  his  own  protection 
was  changed  from  that  of  a  constant  or  courageous  man  to  that  of  a 
person  of  ordinary  firmness. 

That  one  should  be  led  astray  on  the  question  of  there  being  a 
legal  standard  of  resisting  power,  by  which  the  sufficiency  of  the 
oppressive  conduct  claimed  to  have  produced  duress  in  a  given  case 
must  be  tested,  is  most  natural  in  view  of  the  number  and  character 
of  the  authorities  to  that  effect. 

Sufficient  has  been  said  to  show  the  conflict  that  exists  on  the 
subject  under  discussion.  Under  [the  more  advanced  doctrine],  ad- 
vantages obtained  by  what  was  considered  duress  by  old  common- 
law  rules, — or  such  rules  as  changed  in  respect  to  the  standard  of 
resisting  power  which  the  threatened  person  is  legally  bound  to  exer- 
cise for  his  own  protection  or  be  remediless  at  law  for  the  conse- 
quences, and  in  respect  to  the  nature  of  the  threats  deemed  legally 
sufficient  to  overcome  a  person  of  the  legal  standard  of  resisting 
power, — and  also  advantages  wrongfully  obtained, — though  not  by 
duress  in  law  and  remediable  as  such,  but  remediable  in  equity  upon 
the  ground  of  unjust  compulsion, — are  now  practically  in  one  class. 
Duress,  in  its  broad  sense,  now  includes  all  instances  where  a  condition 
of  mind  of  a  person,  caused  by  fear  of  personal  injury  or  loss  of 
limb,  or  injury  to  such  person's  property,  wife,  child,  or  husband, 
is  produced  by  the  wrongful  conduct  of  another,  rendering  such 
person  incompetent  to  contract  with  the  exercise  of  his  free  will 
power,  whether  formerly  relievable  at  law  on  the  ground  of  duress 
or  in  equity  on  the  ground  of  wrongful  compulsion. 

The  making  of  a  contract  requires  the  free  exercise  of  the  will 
power  of  the  contracting  parties,  and  the  free  meeting  and  blending 
of  their  minds.  In  the  absence  of  that,  the  essential  of  a  contract 
is  wanting;  and  if  such  absence  be  produced  by  the  wrongful  conduct 
of  one  party  to  the  transaction,  or  conduct  for  which  he  is  respon- 
sible, whereby  the  other  party,  for  the  time  being,  through  fear,  is 
bereft  of  his  free  will  power,  for  the  purpose  of  obtaining  the  con- 
tract, and  it  is  thereby  obtained,  such  contract  may  be  avoided  on 
the  ground  of  duress.  There  is  no  legal  standard  of  resistance  which 
a  party  so  circumstanced  must  exercise  at  his  peril  to  protect  him- 
self. The  question  in  each  case  is,  Was  the  alleged  injured  person, 
by  being  put  in  fear  by  the  other  party  to  the  transaction  for  the 
purpose  of  obtaining  an  advantage  over  him,  deprived  of  the  free 
exercise  of  his  will  power,  and  was  such  advantage  thereby  obtained? 
If  the  proposition  be  determined  in  the  affirmative,  no  matter  what 
the  nature  of  the  threatened  injury  to  such  person,  or  his  property, 
or  the  jjerson  or  liberty  of  his  wife  or  child,  the  advantage  thereby 
obtained  cannot  be  retained.    The  idea  is  that  what  constitutes  duress 


FORMATION  OF  CONTRACTS  I43 

is  wholly  a  matter  of  law  and  is  simply  the  deprivation  by  one  person 
of  the  will  power  of  another  by  putting  such  other  in  fear  for  the 
purpose  of  obtaining,  by  that  means,  some  valuable  advantage  of  him. 
The  means  by  which  that  condition  of  mind  is  produced  are  matters  of 
fact,  and  whether  such  condition  was  in  fact  produced  is  usually 
wholly  matter  of  fact,  though  of  course  the  means  may  be  so  op- 
pressive as  to  render  the  result  an  inference  of  law. 

From  the  foregoing  it  will  be  seen  that  the  true  doctrine  of 
duress,  at  the  present  day,  both  in  this  country  and  England,  is  that 
a  contract  obtained  by  so  oppressing  a  person  by  threats  regarding 
his  personal  safety  or  liberty,  or  that  of  his  property,  or  of  a  mem- 
ber of  his  family,  as  to  deprive  him  of  the  free  exercise  of  his  will 
and  prevent  the  meeting  of  minds  necessary  to  a  valid  contract,  may 
be  avoided  on  the  ground  of  duress,  whether  the  oppression  causing 
the  incompetence  to  contract  be  produced  by  what  was  deemed  duress 
formerly,  and  relievable  at  law  as  such,  or  wrongful  compulsion 
remediable  by  an  appeal  to  a  court  of  equity.  The  law  no  longer 
allows  a  person  to  enjoy,  without  disturbance,  the  fruits  of  his 
iniquity  because  his  victim  was  not  a  person  of  ordinary  courage ; 
and  no  longer  gauges  the  acts  that  shall  be  held  legally  sufficient 
to  produce  duress  by  an  arbitrary  standard,  but  holds  him  who, 
by  putting  another  in  fear,  shall  have  produced  in  him  a  state  of 
mental  incompetency  to  contract,  and  then  takes  advantage  of  such 
condition,  no  matter  by  what  means  such  fear  be  caused,  liable  at 
the  option  of  such  other  to  make  restitution  to  him  of  everything 
of  value  thereby  taken  from  him. 

2.     Threat  of  Lawful  Act. 

Silsbee  v.  Webber.  lyi  Mass.  j/8. 

Webber  accused  Mrs.  Silsbee's  son  of  stealing  money  from  him, 
and  forced  the  son  to  confess  and  to  promise  security  for  $1500. 
His  mother,  the  plaintiff,  met  Webber,  who  threatened  to  tell  her 
husband  the  facts  if  she  did  not  assign  to  him  her  share  in  her 
father's  estate  to  secure  the  son's  debt.  She  did  this  for  the  reason 
that  her  husband  was  then  on  the  verge  of  insanity  and  she  feared 
that  knowledge  of  the  situation  would  drive  him  insane.  She 
now  seeks  to  recover  the  money  paid  to  Webber. 

Held,  that  duress  may  consist  of  threats  of  a  lawful  act. 

Holmes,  J. 

The  strongest  objection  to  holding  the  defendant's  alleged  action 
illegal  duress  is,  that,  if  he  had  done  what  he  threatened,  it  would 
not  have  been  an  actionable  wrong.  In  general,  duress  going  to 
motives  consists  in  the  threat  of  illegal  acts.  Ordinarily,  what 
you  may  do  without  liability,  you  may  threaten  to  do  without  liability. 
But  this  is  not  a  question  of  liability  for  threats  as  a  cause  of  action, 


144  COMMERCIAL    LAW    CASES 

and  we  may  leave  undecided  the  question  whether,  apart  from  spe- 
cial justification,  deliberately  and  with  foresight  of  the  consequences, 
to  tell  a  man  what  you  believe  will  drive  him  mad  is  actionable  if 
it  has  the  expected  effect.  If  it  should  be  held  not  to  be,  contrary 
to  the  intimations  in  the  cases  cited,  it  would  be  only  on  the  ground 
that  a  different  rule  was  unsafe  in  the  practical  administration  of 
justice.  If  the  law  were  an  ideally  perfect  instrument,  it  would 
give  damages  for  such  a  case  as  readily  as  for  a  battery.  When  it 
comes  to  the  collateral  question  of  obtaining  a  contract  by  threats, 
it  does  not  follow  that,  because  you  cannot  be  made  to  answer  for 
the  act,  you  may  use  the  threat.  In  the  case  of  the  threat  there  are 
no  difficulties  of  proof,  and  the  relation  of  cause  and  effect  is  as 
easily  shown  as  when  the  threat  is  of  an  assault.  If  a  contract  is 
extorted  by  brutal  and  wicked  means,  and  a  means  which  owes  its 
immunity,  if  it  have  immunity,  solely  to  the  law's  distrust  of  its  own 
powers  of  investigation,  in  our  opinion  the  contract  may  be  avoided 
by  the  party  to  whom  the  undue  influence  has  been  applied.  Some 
of  the  cases  go  further,  and  allow  to  be  avoided  contracts  obtained 
by  the  threat  of  unquestionably  lawful  acts. 

3.    Threat  of  Lawful  Imprisonment. 

Morse  v.  Woodworth.  i^j  Mass.  ^jj. 

Morse  sues  to  recover  certain  notes  given  by  him  to  Wood- 
worth.  Morse,  a  bookkeeper  for  Woodworth,  was  short  in  his 
accounts,  and  gave  the  notes  in  suit  to  Woodworth  in  order  to 
avoid  prosecution.  He  now  attempts  to  avoid  this  transaction 
on  the  ground  of  duress. 

Held,  that  a  threat  of  arrest  and  imprisonment  for  an  offense 
of  which  a  party  is  guilty,  may  constitute  duress. 

Knowlton,  J. 

To  set  aside  a  contract  for  duress  it  must  be  shown  that  the 
will  of  one  of  the  parties  was  overcome,  and  that  he  was  thus  sub- 
jected to  the  power  of  another,  and  that  the  means  used  to  induce 
him  to  act  were  of  such  a  kind  as  would  overcome  the  mind  and  will 
of  an  ordinary  person.  It  has  often  been  held  that  threats  of  civil 
suits  and  of  ordinary  proceedings  against  property  are  not  enough, 
because  ordinary  persons  do  not  cease  to  act  voluntarily  on  account 
of  such  threats.  But  threats  of  imprisonment  may  be  so  violent  and 
forceful  as  to  have  that  effect.  It  must  also  be  shown  that  the 
other  party  to  the  contract  is  not,  through  ignorance  of  the  duress 
or  for  any  other  reason,  in  a  position  which  entitles  him  to  take 
advantage  of  a  contract  made  under  constraint  without  voluntary  as- 
sent to  it.  If  lie  knows  that  means  have  been  used  to  overcome  the 
will  of  him  with  whom  he  is  dealing,  so  that  he  is  to  obtain  a  for- 
mal agreement  which  is  not  a  real  agreement,  it  is  against  equity 


FORMATION  OF  CONTRACTS  145 

and  good  conscience  for  him  to  become  a  party  to  the  contract,  and 
it  is  unlawful  for  him  to  attempt  to  gain  a  benefit  from  such  an 
influence  improperly  exerted. 

A  contract  obtained  by  duress  of  unlawful  imprisonment  is 
voidable.  And  if  the  imprisonment  is  under  legal  process  in  regular 
form,  it  is  nevertheless  unlawful  as  against  one  who  procured  it 
improperly  for  the  purpose  of  obtaining  the  execution  of  a  contract; 
and  a  contract  obtained  by  means  of  it  is  voidable  for  duress.  So 
it  has  been  said  that  imprisonment  under  legal  process  issued  for 
a  just  cause  is  duress  that  will  avoid  a  contract. 

It  has  sometimes  been  held  that  threats  of  imprisonment,  to 
constitute  duress,  must  be  of  unlawful  imprisonment.  But  the  ques- 
tion is  whether  the  threat  is  of  imprisonment  which  will  be  unlaw- 
ful in  reference  to  the  conduct  of  the  threatener  who  is  seeking  to 
obtain  a  contract  by  his  threat.  Imprisonment  that  is  suffered 
through  the  execution  of  a  threat  which  was  made  for  the  purpose  of 
forcing  a  guilty  person  to  enter  into  a  contract  may  be  lawful  as 
against  the  authorities  and  the  public,  but  unlawful  as  against  the 
threatener,  when  considered  in  reference  to  his  effort  to  use  for 
his  private  benefit  processes  provided  for  the  protection  of  the 
public  and  the  punishment  of  crime. 

The  question  in  every  such  case  is,  whether  his  liability  to 
imprisonment  was  used  against  him,  by  way  of  a  threat,  to  force 
a  settlement.  If  so,  the  use  was  improper  and  unlawful,  and  if 
the  threats  were  such  as  would  naturally  overcome  the  mind  and 
will  of  an  ordinary  man,  and  if  they  overcome  his,  he  may  avoid 
the  settlement. 

4.     Duress  of  Goods. 

Hackley  v.  Headley.  45  Mich.  569. 

Headley  sues  Hackley  and  McGordon  for  compensation  for 
logs  which  he  had  cut,  hauled,  and  delivered,  under  a  contract 
with  them.  A  dispute  had  arisen  between  the  parties  over  the 
amount  due,  and  Hackley  had  given  Headley  a  note  for  $4,000, 
which  was  less  than  Hackley  admitted  was  due,  taking  a  receipt 
in  full  settlement.  Headley  now  claims  that  he  is  entitled  to 
more  money,  as  the  settlement  was  forced  upon  him  when  he  was 
badly  in  need  of  money,  and  so  was  made  under  duress. 

Held,  that  this  was  not  a  case  of  duress  of  goods,  which  neces- 
sarily involves  an  illegal  exaction  to  which  the  other  party  is 
forced  to  submit  in  order  to  obtain  them. 

Cooley,  J. 

Duress  exists  when  one  by  the  unlawful  act  of  another  is  in- 
duced to  make  a  contract  or  perform  some  act  under  circumstances 
which  deprive  him  of  the  exercise  of   free   will.     It  is  commonly 


146  COMMERCIAL    LAW    CASES 

said  to  be  of  either  the  person  or  the  goods  of  the  party.  Duress 
of  the  person  is  either  by  imprisonment,  or  by  threats,  or  by  an 
exhibition  of  force  which  apparently  cannot  be  resisted.  It  is  not 
pretended  that  duress  of  the  person  existed  in  this  case ;  it  is  if 
anything  duress  of  goods,  or  at  least  of  that  nature,  and  properly 
enough  classed  with  duress  of  goods.  Duress  of  goods  may  exist 
when  one  is  compelled  to  submit  to  an  illegal  exaction  in  order  to 
obtain  them  from  one  who  has  them  in  possession  but  refuses  to 
surrender  them  unless  the  exaction  is  submitted  to. 

The  case  of  Vyne  v.  Glenn,  41  Mich.  112,  differs  essentially 
from  this.  There  was  not  a  simple  withholding  of  moneys  in  that 
case.  The  decision  was  made  upon  facts  found  by  referees  who 
reported  that  the  settlement  upon  which  the  defendant  relied  was 
made  at  Chicago,  which  was  a  long  distance  from  plaintiff's  home 
and  place  of  business;  that  the  defendant  forced  the  plaintiff  into  the 
settlement  against  his  will,  by  taking  advantage  of  his  pecuniary 
necessities,  by  informing  plaintiff  that  he  had  taken  steps  to  stop  the 
payment  of  money  due  to  the  plaintiff  from  other  parties,  and  that 
he  had  stopped  the  payment  of  a  part  of  such  moneys ;  that  defendant 
knew  the  necessities  and  financial  embarrassments  in  which  the 
plaintiff  was  involved,  and  knew  that  if  he  failed  to  get  the  money  so 
due  to  him  he  would  be  ruined  financially;  that  plaintiff  consented 
to  such  settlement  only  in  order  to  get  the  money  due  to  him,  as 
aforesaid,  and  the  payment  of  which  was  stopped  by  defendant,  and 
which  he  must  have  to  save  him  from  financial  ruin.  The  report, 
therefore,  showed  the  same  financial  embarrassment  and  the  same 
great  need  of  money  which  is  claimed  existed  in  this  case,  and  the 
same  withholding  of  moneys  lawfully  due,  but  it  showed  over  and 
above  all  that  an  unlawful  interference  by  defendant  between  the 
plaintiff  and  other  debtors,  by  means  of  which  he  had  stopped  the 
payment  to  plaintiff  of  sums  due  to  him  from  such  other  debtors.  It 
was  this  keeping  of  other  moneys  from  the  plaintift''s  hands,  and  not 
the  refusal  by  defendant  to  pay  his  own  debt,  which  was  the  ruling 
fact  in  that  case,  and  which  was  equivalent,  in  our  opinion,  to  duress 
of  goods. 

5.     Ratification  of  Contract  Obtained  by  Duress. 

The  Oregon  Pacific  Railroad  Co.  v.  Forrest.  128  N.  Y.  83. 

The  Railroad  Company  and  Garrison  entered  into  a  contract, 
whereby  Garrison  aji^reed  to  furnish  steel  rails  to  the  railroad. 
He  took  bonds  of  tlie  Company  as  security.  Subsecjuently,  the 
parties  annulled  the  contract,  and  upon  Garrison's  refusal  other- 
wise to  redeliver  any  of  the  bonds  held  by  him,  the  Company  agreed 
that  he  might  retain  one  hundred  bonds,  to  which  he  would  have 
been  entitled  had  the  contract  been  performed.  The  Company 
now  seeks,  several  years  later,  to  recover  the  bonds  from  Garrison's 


FORMATION    OF    CONTRACTS  I47 

executors  on  the  ground  that  Garrison's  refusal  to  deliver  other 
securities  unless  he  might  retain  those  in  suit,  constituted  duress 
of  goods. 

Held,  that  a  contract  originally  voidable  because  of  duress  may 
be  ratified. 

Earl,  J. 

The  facts  constituting  the  duress  were  immediately  known  to 
the  plaintifif  and  it  was  its  duty  to  act  promptly  in  repudiating  the 
agreement  which  it  had  been  induced  to  enter  into  by  duress.  In- 
stead of  so  doing  it  never  repudiated  the  agreement  until  it  com- 
menced this  action,  more  than  six  years  after  the  agreement  of 
August  thirteenth  had  been  entered  into  and  the  bonds  had  been 
surrendered  to  Garrison ;  and  during  all  that  time  down  to  the  com- 
mencement of  this  action,  it  paid  the  semi-annual  interest  coupons 
upon  the  bonds.  Even  if  it  was  induced  to  pay  the  interest  during 
the  life-time  of  Garrison,  by  promises  on  his  part  to  extend  financial 
aid  in  other  ways  to  the  plaintiff,  the  conduct  of  the  plaintiff  was, 
nevertheless,  a  complete  and  express  ratification  of  the  agreement 
of  August  thirteenth.  If  it  surrendered  its  right  to  repudiate  that 
agreement  on  account  of  duress  it  should  have  taken  its  remedy  by 
holding  Garrison  to  the  agreement  he  made  with  it  for  financial  aid; 
but  it  continued  to  pay  the  interest  upon  these  bonds  for  several 
years  after  Garrison  had  failed  to  keep  the  alleged  promise  he  had 
made  for  financial  aid  to  the  plaintiff  and  after  all  efforts  and 
negotiations  in  that  direction  had  ceased.  During  several  years 
prior  to  the  commencement  of  this  action  the  payment  of  interest 
upon  these  bonds  was  entirely  voluntary.  It  thus  emphatically 
and  repeatedly  acknowledged  the  defendant's  title  to  the  bonds,  and 
when  this  action  was  commenced  it  was  too  late  to  claim  that  they 
had  been  obtained  by  duress.  One  entitled  to  repudiate  a  contract 
on  the  ground  of  duress  should,  like  one  who  attempts  to  repudiate 
a  contract  on  the  ground  of  fraud,  act  promptly. 

6.    Undue  Influence. 

V albert  v.  V albert.  282  III.  41^. 

Francois  Valbert  executed  deeds  to  two  of  his  children  during 
his  lifetime  for  the  purpose  of  equalizing  a  division  of  his  prop- 
erty between  them  and  the  others.  He  afterwards  made  a  codicil 
to  his  will  expressing  his  intention  to  leave  his  property  equally 
among  his  children.  Francois  was  eighty-four  years  old  at  the 
time,  was  childish,  and  his  actions  were  erratic.  Franklin  Valbert, 
another  son,  seeks  to  set  aside  these  deeds  on  the  ground  of  undue 
influence  by  Jay  Valbert,  one  of  the  children  to  whom  the  property 
was  conveyed. 


148  COMMERCIAL    LAW    CASES 

Held,  that  in  order  to  constitute  undue  influence,  there  must 
be  such  abuse  of  confidence  that  the  grantor  is  deprived  of  his  free 
agency. 

Carter,  C.  J. 

Undue  influence  is  a  species  of  constructive  fraud  which  the 
courts  will  not  undertake  to  define  by  definite  words  or  rules.  In- 
fluence, to  render  a  conveyance  inoperative,  must  be  of  such  a  na- 
ture as  to  deprive  the  grantor  of  his  free  agency.  Undue  influence 
means  a  wrongful  influence, — such  an  influence  as  makes  the  grantor 
or  testator,  in  the  instrument  executed,  speak  the  will  of  another 
and  not  his  own.  It  is  not  sufficient  to  avoid  a  will  or  deed  that  its 
execution  was  procured  by  honest  argument,  untainted  with  fraud. 
Proper  and  legitimate  influence,  honestly  acquired,  is  not  the  exercise 
of  undue  influence.  Such  influence  must  be  exercised  and  operate 
at  the  time  of  the  transaction  sought  to  be  impeached.  Something 
more  than  suspicion  is  required  to  prove  the  allegation  of  fraud. 
The  evidence  must  be  clear  and  cogent  and  must  leave  the  mind 
well  satisfied  that  the  allegation  is  true.  None  of  the  defendants  in 
error  were  present  at  the  time  of  the  execution  of  these  deeds,  and 
there  is  not  the  slightest  evidence  that  tends  to  prove  that  they  were 
exercising  any  undue  influence  on  the  mind  of  the  grantor  at  that  time. 

Counsel  for  plaintiff  in  error  argue  that  a  fiduciary  relation 
existed  between  the  defendant  in  error  Jay  Valbert  and  his  father,  and 
that  therefore  the  deeds  were  prima  facie  void.  Conceding  for 
the  purpose  of  this  case  that  such  a  relation  did  exist  between  the 
son  and  the  father,  the  execution  of  deeds  under  such  circumstances 
will  be  held  valid  if  it  appears  it  was  entered  into  with  full  knowl- 
edge of  the  nature  and  effect  of  the  deeds  and  resulted  from  the  de- 
liberate, voluntary  and  intelligent  desire  of  both  and  not  through 
influence  engendered  by  their  relationship.  The  evidence,  as  we 
have  already  said,  shows  conclusively  that  the  execution  of  these 
deeds  was  the  result  of  the  voluntary  wish  of  the  grantor,  and  not 
because  of  any  undue  influence  exercised  upon  him  by  the  son  or 
any  other  person  connected  with  the  transaction. 

7.     Effect  of  Undue  Influence. 

Bensel  v.  Anderson.  85  N.  J.  E.  jp/. 

Bensel,  a  man  ninety  years  of  age,  was  induced  by  his  son-in- 
law,  Kline,  to  indorse  notes  jointly  with  Anderson,  with  wIkmii 
Kline  was  engaged  in  business.  Successive  notes  were  so  indorsed 
for  the  accommodation  of  Kline  and  Anderson  until  the  business 
failed  and  judgments  were  recovered  by  the  bank  upon  several  of 
the  notes.  This  action  is  brought  by  Bensel  to  avoid  the  effect 
of  these  indorsements,  which  he  contends  were  secured  by  the  un- 
due influence  of  Kline. 


FORMATION    OF    CONTRACTS  I49 

Held,  that  agreements  secured  by  undue  influence  may  be 
avoided  Ijoth  as  to  the  person  with  whom  they  are  made,  and  as 
to  third  persons  for  whose  benefit  they  are  made. 

Backcs,  V.  C. 

The  determination  of  the  issue,  if  it  were  confined  to  Bensel 
and  KHne,  would  involve  no  difficulty  in  condemning  the  transaction 
as  fraudulent.  For  here  we  have  a  tottering  old  man,  in  years  far 
beyond  the  allotted  time,  dependent  for  his  temporal  wants  entirely 
upon  his  children,  and  in  a  large  measure  upon  his  son-in-law, 
a  member  of  his  household,  in  whom  he  undoubtedly  reposed  great 
confidence,  involving  himself,  at  the  latter's  instance,  in  obliga- 
tions which  in  nowise  could  have  benefited  him,  and  if  permitted 
to  stand  would  result  in  sweeping  away  his  meagre  competence, 
leaving  him  impoverished,  a  subject  of  charity,  or,  possibly,  a  public 
charge.  From  such  calamity,  equity  in  a  measure  shields  him.  In 
all  transactions  between  parties  occupying  relations,  whether  legal, 
natural  or  conventional  in  their  origin,  in  which  confidence  is  nat- 
urally inspired,  or,  in  fact,  reasonably  exists,  the  burden  of  proof 
is  thrown  upon  the  person  in  whom  the  confidence  is  reposed,  and 
who  has  acquired  an  advantage,  to  show  affirmatively  not  only  that 
no  deception  was  practiced  therein,  no  undue  influence  used,  and 
that  all  was  fair,  open  and  voluntary,  but  that  it  was  well  under- 
stood. Where  parties  hold  positions  in  which  one  is  more  or  less 
dependent  upon  the  other,  courts  of  equity  hold  that  the  weaker 
party  must  be  protected,  and  they  set  aside  his  gifts  if  he  had 
not  proper  advice,  independently  of  the  other.  The  presumption 
against  the  validity  of  the  gift  is  not  limited  to  those  instances 
where  the  relation  of  parent  and  child,  guardian  and  ward,  or 
husband  and  wife  exists,  but  in  every  instance  where  the  relation 
between  the  donor  and  donee  is  one  in  which  the  latter  has  acquired 
a  dominant  position.  And  where  one  so  situated  is  despoiled  of 
all  his  property,  a  rule  putting  an  additional  burden  upon  the  bene- 
ficiary is  brought  into  play.  Mr.  Justice  Garrison  explains  it  with 
marked  clarity  thus :  "That  a  person  already  aged  or  infirm,  or 
otherwise  dependent,  should  give  to  the  one  upon  whom  he  thus  de- 
pends practically  his  whole  living  beyond  recall,  and  at  the  very 
time  when  apparently  he  had  most  need  to  retain  it,  raises  in  the 
mind  of  a  chancellor  the  presumption  that  the  donor  may  net  have 
appreciated  the  irrevocable  character  of  his  act  or  that  he  did  not 
foresee  its  legal  consequences  to  himself.  This  presumption  of  ap- 
parent improvidence  gives  rise  to  [a]  special  rule  which  may  be 
called  the  rule  of  independent  advice.  By  force  of  this  rule,  if  a 
person  upon  whom  another  has  in  fact  come  to  be  dependent  accepts 
a  gift  from  such  dependent  person  of  all  his  or  her  estate,  a  court 
of  equity,  moved  by  the  apparent  improvidence  of  such  a  gift,  casts 
upon  the  donee  the  burden  of  showing  that  the  donor  had  the  benefit 
of  proper  independent  advice.      Proper  independent  advice   in  this 


150  COMMERCIAL    LAW    CASES 

connection  means  that  the  donor  had  the  preliminary  benefit  of 
conferring  fully  and  privately  upon  the  subject  of  his  intended  gift 
with  a  person  who  was  not  only  competent  to  inform  him  correctly 
as  to  its  legal  effect,  but  who  was  furthermore  so  disassociated  from 
the  interests  of  the  donee  as  to  be  in  a  position  to  advise  with  the 
donor  impartially  and  confidently  as  to  the  consequences  to  himself 
of  his  proposed  benefaction."  These  beneficent  rules  of  equity  have 
been  chiefly  employed  in  cases  of  outright  gifts,  but  their  underlying 
principles  call  for  their  application  as  vigorously,  in  circumstances 
where  the  subject,  by  enmeshing  and  entangling  himself,  has  his 
property  taken  from  him  by  legal  process,  as  where  he  gives  it  away. 
The  result  is  the  same.  And,  when  inspired  by  confidential  relation, 
the  presumption  of  undue  influence  is  as  much  excited  in  the  former 
as  in  the  latter  instance,  and  the  rules  applicable  to  the  one  are  as 
fitting  to  the  other. 

The  important  inquiry  in  the  case  then  is,  is  the  vice  in  Ben- 
sel's  undertaking — the  constructive  fraud — chargeable  to  Anderson? 
Courts  of  equity  have  been  prone  to  disallow  contracts  in  favor  of 
third  parties,  where  advantage  is  derived  through  confidential  re- 
lations, and  the  opinions  plainly  indicate  how  far  the  beneficiary 
must  go  to  overcome  impeachment  on  this  ground.  The  authorities, 
in  instances  of  duress  by  parents,  where  parental  influence  was  pre- 
sumed to  prevail  after  the  child  had  arrived  at  legal  age,  are 
especially  apposite,  inasmuch  as  the  complainant's  advanced  years 
and  dependency  put  Kline  in  the  ascendant  position.  Other  cases 
where  trust  and  confidence  subsisted  are  also  in  point.  In  Berdoe 
V.  Dawson,  34  Beav.  603,  two  sons  mortgaged  their  estate  to  secure 
a  debt  of  the  father.  They  were  the  age  of  twenty-five  and  twenty- 
three,  respectively,  and  lived  with  the  father.  In  setting  aside  the 
mortgages,  the  master  of  the  rolls,  Sir  John  Romilly,  said  that,  "When 
a  person  executes  a  deed  by  which  his  father,  or  any  other  person 
nearly  related  and  connected  with  him,  or  who,  from  any  other 
cause,  has  necessarily  a  considerable  influence  over  him  is  benefited, 
then  the  person  who  claims  the  benefit  of  that  deed  is  bound  to 
establish  two  things — he  is  bound  to  establish,  in  the  first  place, 
that  the  person  who  executed  the  deed  knew  what  he  was  about 
when  he  executed  it ;  and,  in  the  next  place,  he  is  bound  to  show  that 
it  was  made  of  his  own  free  will,  and  unbiased  by  and  without  being 
subject  to  that  influence  which  he  could  not  easily  resist.  The  cases 
upon  the  subject  are  exceedingly  strong  in  showing  that  this  sort 
of  security  cannot  be  relied  upon." 


FORMATION   OF   CONTRACTS  I5I 

VI. 

LEGALITY  OF  SUBJECT  MATTER. 

An  agreement  does  not  result  in  a  valid  contract  if  its  object 
is  illegal.  Such  agreements  may  conteir.plate  a  violation  of  positive 
law  or  a  refusal  to  do  acts  required  by  law.  They  may  involve 
the  commission  of  a  crime  or  the  doing  of  a  civil  wrong.  They 
make  a  contract  void,  not  voidable.  A  distinction  exists  between 
agreements  to  violate  statutes  enacted  for  the  benefit  of  the  public 
and  agreements  to  violate  statutes  enacted  for  revenue  purposes 
or  for  direction  as  to  the  conduct  of  business.  The  first  are  void, 
but  the  second  are  valid.  It  is  a  matter  of  considerable  nicety 
to  draw  the  line  between  these  two  classes  of  cases.  In  general, 
statutes  regulating  trade  or  business,  and  traffic  in  intoxicating 
liquors,  as  v/ell  as  statutes  prohibiting  the  making  of  contracts 
on  Sunday,  the  taking  of  usury,  gaming  and  lotteries  are  held  to 
be  for  the  benefit  of  the  public.  Contracts  made  in  violation 
thereof  are  void. 

Sunday  contracts  are  illegal  if  the  entire  contract  is  completed 
on  Sunday.  If  preliminary  terms  are  agreed  upon  on  Sunday 
but  the  contract  is  not  completed  before  the  following  day,  the 
contract  is  valid.  Some  states  allow  ratification  of  a  contract 
made  on  Sunday,  though  the  majority  do  not.  If  goods  are  de- 
livered pursuant  to  a  contract  made  on  Sunday,  the  seller  may 
recover  their  value  on  the  theory  of  an  implied  contract,  but  may 
not  sue  on  the  contract  itself. 

Usury  consists  of  taking  a  greater  amount  of  interest  than  the 
law  allows.  In  most  jurisdictions,  the  efifect  is  to  prevent  the 
recovery  of  the  illegal  interest  merely,  though  in  some  states  the 
entire  transaction  is  void.  Gaming  contracts  include  wagers,  bets, 
card  playing  for  money  and  engaging  in  sports  for  a  stake.  A 
lottery  is  the  payment  of  money  for  a  consideration  which  depends 
upon  chance.  Stock  transactions  which  do  not  involve  an  actual 
purchase  or  sale  of  securities  are  held  to  be  illegal  contracts  of 
this  nature.  Most  states  have  passed  statutes  regulating  such 
contracts. 

Other  contracts  are  void  as  against  public  policy  because  of 
their  mischievous  tendency.  They  may  or  may  not  be  expressly 
prohibited  by  common  law  or  by  statute.  In  general,  any  agree- 
ment of  an  immoral  or  fraudulent  tendency  when  the  public  is 
involved,  or  of  a  sort  calculated  to  injure  the  public  welfare, 
comes  under  this  heading.  Such  agreements  include  contracts  in- 
juring the  public  service,  perverting  the  course  of  justice,  ousting 


152  COMMERCIAL   LAW    CASES 

the  courts  of  jurisdiction,  abusing  legal  process,  affecting  freedom 
of  marriage,  together  with  contracts  against  good  morals,  contracts 
intended  to  secure  secret  advantages  in  compositions  with  creditors, 
and  contracts  irj  restraint  of  trade. 

When  a  contract  is  illegal  in  part  only,  and  that  part  may  be 
separated  from  the  rest,  the  valid  portion  may  be  enforced.  If, 
however,  the  illegal  portion  goes  to  the  root  of  the  whole  matter, 
the  contract  is  void.  In  an  executory  contract  which  is  illegal, 
a  person  who  has  paid  money  under  it  may  withdravv^  and  recover 
back  the  money  until  such  time  as  the  contract  is  partly  executed. 
Courts  allow  this  opportunity  to  withdraw  on  the  ground  that 
there  exists  a  right  to  recede  so  long  as  the  party  may  repent 
without  having  been  seriously  tainted  by  the  illegality. 

I.    Effect  of  Illegality. 

Atwood  V.  Fiske.  loi  Mass.  jdj. 

Joseph  Atwood,  a  bookkeeper  in  the  employ  of  the  defendants, 
was  charged  by  them  with  embezzlement.  The  plaintiffs  gave  two 
mortgages  and  notes,  now  overdue,  to  the  defendants,  in  considera- 
tion of  their  forbearance  to  prosecute  Joseph  Atwood,  and  they 
now  bring  bills  in  equity  to  secure  cancellation  of  the  notes  and 
mortgages  on  the  ground  that  the  contract  was  illegal. 

Held,  that  the  court  will  not  interfere  on  behalf  of  either  party 
to  an  illegal  contract. 

Ames,  J. 

A  note,  given  in  consideration  of  a  composition  of  felony,  or 
of  a  promise  not  to  prosecute  for  a  crime  of  a  lower  degree  than  a 
felony,  is  illegal,  and  cannot  be  enforced  by  the  promisee  against 
the  promisor.  And  it  makes  no  difference  that,  of  various  elements 
making  up  the  entire  consideration,  a  part,  and  even  the  larger  part, 
was  legal  and  valid.  If  part  of  the  consideration  was  illegal,  the 
effect  upon  the  note  would  be  the  same  as  if  the  whole  were 
illegal. 

But  it  has  also  long  been  settled  that  if  the  law  will  not  aid  either 
party  to  an  illegal  contract  to  enforce  it  against  the  other,  neither 
will  it  relieve  a  party  to  such  a  contract  who  has  actually  fulfilled  it, 
and  who  seeks  to  reclaim  his  money  or  whatever  article  of  property 
he  may  have  applied  to  such  a  purpose.  The  meaning  of  the  familiar 
maxim,  in  pari  delicto  potior  est  conditio  defcndcntis,  is  simply  that 
the  law  leaves  the  parties  exactly  where  they  stand;  not  that  it  pre- 
fers the  defendant  to  the  plaintiff,  but  that  it  will  not  recognize  a 
right  of  action,  founded  on  the  illegal  contract,  in  favor  of  either 
party  against  the  other.  They  must  settle  their  own  questions  in  such 
cases  without  the  aid  of  the  courts.     In  the  somewhat  quaint  language 


FORMATION    OF    CONTRACTS  153 

of  Lord  Chief  Justice  Wilmot,  "all  writers  upon  our  law  agree  in  this; 
no  polluted  hand  shall  touch  the  pure  fountains  of  justice.  Whoever 
is  a  party  to  an  unlawful  contract,  if  he  hath  once  paid  the  money 
stipulated  to  be  paid  in  pursuance  thereof,  he  shall  not  have  the  help 
of  a  court  to  fetch  it  back  again ;  you  shall  not  have  a  right  of  action 
when  you  come  into  a  court  of  justice  in  this  unclean  manner  to 
recover  it  back."  In  this  respect  the  rule  in  equity  is  the  same  as  at 
law.  Equity  follows  the  rule  of  the  law,  and  will  not  interfere  for 
the  benefit  of  one  such  party  against  a  particeps  criminis.  The  sup- 
pression of  illegal  contracts  is  far  more  likely  in  general  to  be  accom- 
plished, by  leaving  the  parties  without  remedy  against  each  other. 
And  so  the  modern  doctrine  is  established,  that  relief  is  not  granted 
where  both  parties  are  truly  in  pari  delicto. 

2.     Agreement  to  Commit  a  Crime. 

Arnold  V.  Clifford.   2  Sumner  (C.  C.  JJ.  S.)  2j8. 

The  defendant,  who  had  secured  the  publication  in  a  news- 
paper of  a  libel  concerning  the  plaintiff,  agreed  to  indemnify  the 
publisher  against  any  consequences  arising  from  the  publication. 
The  question  arises  whether  such  an  agreement  is  valid. 

Held,  that  an  agreement  to  commit  a  crime,  or  to  indemnify 
one  who  commits  a  crime,  is  illegal  and  void. 

Story,  J. 

A  promise  to  indemnify  another  for  doing  a  private  wrong,  or 
for  committing  a  public  crime,  is  against  public  policy,  and  is  void  in 
law.  It  is  common  learning,  that  among  tort-feasors,  who  are  know- 
ingly such,  there  can  be  no  contribution  for  damages  recovered  against 
any  one  of  them,  even  although  there  be  a  promise  of  indemnity  or 
contribution.  The  same  doctrine  applies  to  cases  of  indemnity  for 
the  commission  of  a  public  crime.  No  one  ever  imagined  that  a 
promise  to  pay  for  poisoning  of  another,  was  capable  of  being  en- 
forced in  a  court  of  justice.  It  is  universally  treated  as  illegal,  it 
being  against  the  first  principles  of  justice,  and  morals,  and  religion. 
The  man  who  is  hired  to  publish  a  libel  against  another,  is  guilty  of 
an  offence  equally  reprehensible  in  morals,  though  not  so  aggravated 
in  its  character;  for  the  publication  may  not  only  be  ruinous  to  the 
reputation  of  the  individual  aspersed,  but  may  involve  an  innocent 
family  in  agonizing  distress,  and,  perhaps,  destroy  its  peace  forever. 
There  is  no  such  right  recognized  in  civil  society,  or  at  least  in  our 
forms  of  government,  as  the  right  of  slandering  or  calumniating 
another.  The  liberty  of  the  press  does  not  include  the  right  to  publish 
libels.  Much  less  does  it  include  the  right  to  be  indemnified  against 
the  just  legal  consequences  of  such  publications. 


154  COMMERCIAL    LAW    CASES 

3,    Agreement  to  Commit  a  Private  Wrong. 

Hinnen  v.  Newman.  55  Kas.  /op. 

Newman,  an  auctioneer,  was  employed  to  sell  two  horses. 
He  induced  Hinnen,  the  plaintiff,  to  huy  in  the  horses  for  him, 
agreeing  to  reimburse  Hinnen,  and  Hinnen  made  the  purchase. 
Newman  subsequently  got  possession  of  the  horses,  but  Hinnen 
claims  that  they  belong  to  him,  and  seeks  to  recover  them  from 
Newman. 

Held,  that  a  contract  to  commit  a  private  wrong  is  illegal,  and 
neither  party  can  take  advantage  of  the  contract. 

Johnston,  J. 

The  whole  transaction  between  these  parties  contravenes  public 
policy  and  is  clearly  illegal,  and  the  general  rule  is  that  an  action 
founded  upon  an  illegal  transaction,  where  the  parties  are  in  pari 
delicto,  cannot  be  maintained.  In  all  such  cases  the  courts  refuse  to 
assist  the  parties  to  carry  out  or  to  reap  the  fruits  of  tlie  illegal  trans- 
action, but  will  leave  them  in  the  condition  in  which  they  were  found. 

The  law  leaves  the  parties  to  such  a  contract  as  it  found  them. 
If  either  has  sustained  a  loss  by  the  bad  faith  of  a  particeps  criminis, 
it  is  but  a  just  infliction  for  premeditated  and  deeply-practiced  fraud, 
which,  when  detected,  deprives  him  of  anticipated  profits,  and  sub- 
jects him  to  unexpected  losses.  He  must  not  expect  that  a  judicial 
tribunal  will  degrade  itself  by  the  exertion  of  its  powers  by  shifting 
the  loss  from  the  one  to  the  other,  or  equalize  the  benefits  or  burdens 
which  may  have  resulted  by  the  violation  of  every  principle  of 
morals  and  of  laws. 

Here,  both  of  the  parties  before  the  court  were  directly  concerned 
in  the  transaction.  Together  they  secretly  conspired  to  and  did  com- 
mit a  wrong  against  others.  The  transaction  tainted  with  illegality 
was  voluntarily  entered  into  and  consummated  by  them.  There  was 
no  restraint  upon  the  plaintiff  compelling  him  to  carry  out  the  unlaw- 
ful purpose,  nor  does  any  fact  appear  which  affords  him  any  excuse 
for  his  misconduct  or  that  would  bring  him  within  any  of  the  excep- 
tions to  the  rule  that  have  been  stated.  He  concedes  that  the  contract 
was  illegal,  but  to  escape  the  penalty  which  the  law  justly  imposes 
upon  a  guilty  participant,  he  says  that  the  property  was  bid  in  in  his 
own  name,  and  paid  for  with  his  own  funds,  and  he  claims  that  his 
right  of  action  is  based  on  these  facts  rather  than  on  the  illegal  trans- 
action, and  that  he  can  make  out  his  cause  of  action  without  the  aid 
of  that  transaction.  It  is  claimed  that  the  true  test  for  determining 
his  right  of  recovery  is  by  considering  whether  he  can  establish  his 
case  without  the  necessity  of  having  recourse  to  the  illegal  transaction, 
and  if  so,  he  must  prevail.  This  test  is  applied  for  the  only  purpose 
of  determining  whether  the  parties  before  the  court  are  in  pari  delicto, 
in  which  case  they  are  remediless.     There  is  little  necessity  or  room 


FORMATION    OF    CONTRACTS  155 

for  the  application  of  this  test  where  the  plaintiff  and  defendant  are 
so  obviously  in  equal  fault  as  we  have  seen  the  parties  are  in  this  case. 
But  if  the  test  proposed  is  applicable,  it  will  not  avail  the  plaintiff. 
The  only  interest  or  right  of  possession  which  he  has  in  the  property 
is  derived  from  the  sale,  which  is  confessedly  illegal.  To  establish 
his  case,  he  must  show  that  he  purchased  the  property  at  that  sale, 
and  he  thereby  brings  the  illegal  transaction  into  the  case.  Both 
parties  claim  under  that  sale — the  plaintiff  because  he  bid  in  the 
property  in  his  own  name,  and  the  defendant  because  it  was  bid  in 
for  him  and  not  for  the  plaintiff.  Neither  of  them  can  come  into 
court  with  clean  hands  and  ask  anything  under  the  fraudulent  and 
illegal  transaction.  If  the  possession  of  the  property  was  changed 
and  the  defendant  were  in  court  seeking  to  obtain  possession  of  it, 
he  would  be  refused  assistance,  although  from  the  findings  it  appears 
that  the  property  was  purchased  solely  for  him.  He  is  in  no  better 
position  than  the  plaintiff,  and  would  be  entitled  to  no  greater  con- 
sideration. 

4.     Agreement  to  Violate  Directory  Statute  not  Void. 

Bowditch  V.  New  England  Mutual  Life  Insurance  Co.  141 
Mass.  2^2. 

Burgess,  a  member  of  the  finance  committee  of  the  defendant 
company,  borrowed  money  from  it  in  the  name  of  his  son,  in 
violation  of  a  statute  prohibiting  loans  to  officers  of  such  com- 
panies. His  trustee  now  sues  to  recover  bonds  put  up  as  collat- 
eral security  for  notes  signed  by  Sidney  W.  Burgess,  his  son. 

Held,  that  although  such  a  contract  is  prohibited  in  the  case 
of  an  individual,  the  contract  itself  does  not  thereby  become  void. 

Morton,  C.  J. 

The  statute  provides  that  "no  member  of  a  committee  or  officer 
of  a  domestic  insurance  company,  who  is  charged  with  the  duty  of 
investing  its  funds,  shall  borrow  the  same,  or  be  surety  for  such 
loans  to  others,  or  directly  or  indirectly  be  liable  for  money  borrowed 
of  the  company." 

It  is  a  rule  universally  accepted,  that,  if  a  statute  prohibits  a 
contract  in  the  lensc  of  making  it  unlawful  for  anyone  to  enter  into 
it,  such  a  contract,  if  made,  is  wholly  void,  and  cannot  be  enforced. 
But  it  is  often  a  difficult  question  to  determine  whether  a  statute 
forbidding  an  act  to  be  done,  or  enjoining  the  mode  of  doing  it,  is 
prohibitory,  so  as  to  make  any  contract  in  violation  of  it  absolutely 
void,  or  whether  it  is  directory  in  its  purpose,  and  does  not  necessarily 
invalidate  the  contract.  Though  it  may  be  impossible  to  formulate 
a  rule  which  will  reconcile  all  the  adjudications,  yet  the  decisions 
recognize  a  clear  distinction  between  these  two  classes  of  cases. 
There  is  a  large  class  of  cases,  both  h\  tliis  country  and  in  England, 


156  COMMERCIAL    LAW    CASES 

in  which  statutes  have  enacted,  in  substance,  that  goods  should  only 
be  sold  in  certain  measures,  or  in  a  certain  manner,  or  after  being 
inspected  and  branded  by  pubHc  officers ;  and  it  has  been  held  that 
contracts  of  sale  which  do  not  meet  the  requirements  of  such  statutes 
are  absolutely  void.  The  purpose  of  such  statutes  is  to  protect  the 
buyer  from  the  imposition  of  the  seller,  a  purpose  which  would  be 
wholly  thwarted  unless  the  contracts  are  held  void,  and  therefore 
the  intention  of  the  legislature  to  make  them  void  is  inferred. 

So  statutes  prohibiting  any  work  on  the  Lord's  Day,  except  work 
of  necessity  or  charity,  have  been  construed  to  make  entirely  void 
any  contract  made  in  violation  of  their  provisions.  On  the  other 
hand,  there  are  numerous  cases  where  statutes  forbid  certain  acts  to 
be  done,  and  in  a  sense  forbid  certain  contracts  to  be  made,  and  yet 
it  is  held  that  contracts  made  in  contravention  of  the  statutes  are  not 
void.  When  usurious  contracts  were  forbidden  by  our  laws,  under  a 
penalty  of  forfeiting  threefold  the  amount  of  interest  reserved  or 
taken,  the  act  of  making  such  a  contract  was  illegal,  but  the  contract 
was  not  void.  The  imposition  of  the  defined  penalty  showed  that  the 
legislature  did  not  intend  that  the  contract  should  be  wholly  void, 
as  this  woi:."d  be  imposing  an  added  penalty. 

Many  other  cases  might  be  cited,  in  which  it  has  been  held  that 
contracts  made  in  violation  of  the  provisions  of  statutes  are  not  void, 
upon  the  ground  that  the  statutes  are  intended  merely  to  be  directory 
to  the  officers  or  persons  to  whom  they  are  addressed,  and  not  to  be 
conditions  precedent  to  the  validity  of  contracts  made  in  reference 
to  them.  Each  statute  must  be  judged  by  itself  as  a  whole,  regard 
being  had  not  only  to  its  language,  but  to  the  objects  and  purposes 
for  which  it  was  enacted.  If  the  statute  does  not  declare  a  contract 
made  in  violation  of  it  to  be  void,  and  if  it  is  not  necessary  to  hold 
the  contract  void  in  order  to  accomplish  the  purposes  of  the  statute, 
the  inference  is  that  it  was  intended  to  be  directory,  and  not  prohibitory 
of  the  contract. 

For  the  reasons  stated,  we  are  of  opinion  that  the  notes  signed 
by  Sidney  W.  Burgess  are  valid  contracts,  which  can  be  enforced  by 
the  corporation. 

5.     Agreement  to  Violate  Statute  for  Revenue  Purposes  Only 
Not  Void. 

Aiken  v.  Blaisdell.  41  Vt.  655. 

Blaisdell  bought  liquor  on  credit  from  Crapo  and  Aiken. 
Crapo  and  Aiken,  through  an  oversight,  did  not  have  the  federal 
h'cense  required  by  law,  when  they  sold  the  liquor.  In  an  action 
for  the  price,  the  defense  is  in  part  that  any  sale  by  them  was 
illegal  and  void. 

Held,  that  a  contract  in  violation  of  the  provisions  of  a  statute 
enacted  for  revenue  purposes  only,  is  not  void. 


FORMATION  OF  CONTRACTS  1 57 

Pierpoint,  C.  J. 

The  question  recurs:  Was  this  contract  made  in  violation  of  the 
act  of  congress?  Or  in  other  words,  did  congress,  by  the  act  referred 
to,  intend  to  prohibit  such  a  transaction,  so  as  to  invaHdate  the  sale? 
This,  we  think,  must  be  determined  by  the  object,  intent  and  purpose 
of  congress  in  passing  the  law  under  consideration.  Did  congress 
intend  that  the  act  should  operate  upon  the  business  community,  or 
only  upon  the  persons  that  should  engage  in  the  business?  It  was 
manifestly  not  the  intention  of  congress,  by  the  enactment  referred  to, 
to  make  any  kind  of  business  illegal,  or  to  prohibit  it.  The  purpose 
was  not  to  diminish,  restrain,  control,  or  regulate  business.  The 
transaction  of  all  kinds  of  business  was  just  as  legal  after  the  passage 
of  the  law  as  before.  The  law  is  strictly  a  revenue  law,  the  sole 
object  being  to  get  money  into  the  treasury,  and  that  is  accomplished 
by  requiring  all  persons  that  engage  in  certain  kinds  of  business  to 
contribute  a  certain  amount  towards  paying  the  liabilities  of  the 
government.  Its  object  is  to  raise  money,  and  not  to  regulate  the 
business  of  the  country.  If  a  man  engages  in  the  kind  of  business 
referred  to,  he  is  engaged  in  a  legal  business,  whether  he  has  a 
license  or  not.  If  he  has  no  license,  he  has  no  legal  right  to  do  it, 
and  subjects  himself  to  the  penalty.  The  law,  we  think,  was  intended 
to  operate  upon  the  person,  and  not  upon  the  business.  If  the  object 
of  the  law  had  been  to  prohibit  certain  kinds  of  business,  or  to  regu- 
late it,  with  a  view  to  its  effect  upon  public  morals  or  public  security, 
by  limiting  it  in  its  extent,  or  the  place  where  it  is  to  be  carried  on, 
or  the  persons  who  shall  conduct  it,  or  otherwise,  in  all  such  cases 
the  law  operates  upon  the  business  as  well  as  the  person;  revenue 
mainly  in  such  cases  is  not  the  object,  it  is  only  incidental,  or  the 
means  by  which  the  law  regulates  and  controls  the  business.  The  act 
in  question  imposes  no  restrictions  upon  the  business;  all  are  at  liberty 
to  engage  therein  where,  and  when,  and  to  any  extent  they  choose 
upon  paying  for  the  license. 

6.     Agreement  to  Violate  Statute:   Sunday  Contracts. 

Cranson  v.  Goss.  10/  Mass.  4^p. 

A  note,  dated  the  following  Wednesday,  was  made  by  Goss 
on  Sunday  to  the  order  of  George  Wells,  and  was  by  him  indorsed 
to  Cranson.  Cranson  had  no  knowledge  of  the  fact  that  the  con- 
tract for  which  the  note  was  given  was  completed  on  Sunday,  nor 
that  the  note  was  made  at  any  time  other  than  its  date  indicated. 

Held,  that  a  holder  in  due  course  of  a  note  made  on  Sunday 
may  enforce  it  against  the  maker. 

Gray,  J. 

The  ground  upon  which  courts  have  refused  to  maintain  actions 
on  contracts  made  in  contravention  of  statutes  for  the  observance  of 


158  COMMERCIAL    LAW    CASES 

the  Lord's  Day,  is  the  elementary  principle  that  one  who  has  himself 
participated  in  a  violation  of  law  cannot  be  permitted  to  assert  in  a 
court  of  justice  any  right  founded  upon  or  growing  out  of  the  illegal 
transaction. 

The  general  principle  was  long  ago  stated:  "The  objection  that 
a  contract  is  immoral  or  illegal,  as  between  plaintifif  and  defendant, 
sounds  at  all  times  very  ill  in  the  mouth  of  the  defendant.  It  is  not 
for  his  sake,  however,  that  the  objection  is  ever  allowed;  but  it  is 
founded  on  general  principles  of  policy,  which  the  defendant  has 
the  advantage  of,  contrary  to  the  real  justice,  as  between  him  and 
the  plaintiff;  by  accident,  if  I  may  so  say.  No  court  will  lend  its 
aid  to  a  man  who  founds  his  cause  of  action  upon  an  immoral  or 
an  illegal  act.  If  from  the  plaintiff's  own  statement  or  otherwise, 
the  cause  of  action  appears  to  arise  ex  turpi  causa,  or  the  transgres- 
sion of  a  positive  law  of  this  country,  then  the  court  says  he  has  no 
right  to  be  assisted.  It  is  upon  that  ground  the  court  goes;  not  for 
the  sake  of  the  defendant,  but  because  they  will  not  lend  their  aid  to 
such  a  plaintiff.  So  if  the  plaintiff  and  defendant  were  to  change 
sides,  and  the  defendant  were  to  bring  his  action  against  the  plaintiff", 
the  latter  would  then  have  the  advantage  of  it." 

It  is  upon  this  principle  that  a  bond,  promissory  note  or  other 
executory  contract,  made  and  delivered  upon  the  Lord's  Day,  is  in- 
capable of  being  enforced,  or,  as  is  sometimes  said,  absolutely  void 
as  between  the  parties.  And  it  follows  that  as  between  them  it  is 
incapable  of  being  confirmed  or  ratified;  for,  in  suing  upon  the 
original  contract  after  its  ratification  by  the  defendant,  it  would  still 
be  necessary  for  the  plaintiff,  in  proving  his  case,  to  show  his  own 
illegal  act  in  making  the  contract  at  first. 

Upon  the  same  principle,  if  the  contract  has  been  executed  by 
the  illegal  act  of  both  parties  on  the  Lord's  Day,  the  law  will  not 
assist  either  to  avoid  the  effect  of  his  own  unlawful  act.  Thus  if  the 
amount  of  a  preexisting  debt  has  been  paid  and  received  on  Sunday, 
the  law  will  neither  assist  the  debtor  to  recover  back  the  money,  nor 
the  creditor,  while  retaining  the  amount  so  paid,  to  treat  the  payment 
as  a  nullity,  and  enforce  payment  over  again.  If  a  chattel  has  been 
delivered  by  the  owner  to  another  person  on  the  Lord's  Day  by  way 
of  bailment  or  pledge,  the  latter  may  retain  it  for  the  special  purpose 
for  which  he  received  it;  or,  if  it  has  been  delivered  to  him  on  the 
Lord's  Day  by  way  of  sale  or  exchange,  it  cannot,  at  least  if  he  has 
at  the  same  time  paid  or  delivered  the  consideration  on  his  part,  be 
recovered  back  at  all.  If  a  chattel  has  been  sold  and  delivered  on 
the  Lord's  Day  without  payment  of  the  price,  the  seller  cannot  recover 
either  the  price  or  the  value ;  not  the  price  agreed  on  that  day,  because, 
whether  the  property  is  deemed  to  have  passed  to  the  defendant,  or 
to  be  held  by  him  without  right,  there  is  no  ground  upon  which  a 
promise  to  pay  for  it  can  be  implied. 

But  if  the  whole  evidence  shows  a  complete  cause  of  action, 
independently  of  any  participation  of  the  plaintiff  in  an  illegal  trans- 
action, he  may  recover.     Thus  an  agreement  made  on  the  Lord's  Day 


FORMATION    OF    CONTRACTS  159 

for  the  use  and  occupation  of  the  land  is  void ;  but  a  subsequent  entry 
upon  and  occupation  of  the  land  will  sustain  an  action  upon  an  implied 
promise  to  pay  what  its  use  is  reasonably  worth.  So  if  a  written  or 
oral  request  for  the  performance  of  services,  and  promise  to  pay  a 
certain  compeusation  therefor,  is  made  and  received  on  the  Lord's 
Day,  but  there  is  no  proof  of  assent  to  the  request  on  that  day, 
and  the  services  are  performed  on  a  subsequent  day,  before  the  request 
has  been  withdrawn,  the  promised  compensation  may  be  recovered. 

The  law  simply  refuses  to  allow  either  party  to  invoke  any  aid 
from  the  court  to  give  effect  to  an  illegal  transaction  in  which  he  has 
taken  part.  An  additional  illustration  of  this  is  afforded  by  a  recent 
case  in  this  court,  in  which  it  was  held  that  if  a  bargain  is  made  on 
the  Lord's  Day  for  a  sale  of  chattels  (which  is  of  itself  void  and 
incapable  of  ratification)  and  the  chattels  are  delivered  and  accepted 
on  the  following  day,  with  the  purpose  that  they  be  sold  and  paid  for, 
the  seller  may  recover  upon  the  implied  contract  of  the  buyer  to  pay 
what  they  are  reasonably  worth,  and  neither  party  can  be  permitted 
to  prove  the  terms,  either  as  to  price  or  warranty,  agreed  between 
them  on  the  Lord's  Day. 

A  promissory  note  given  and  received  on  Sunday,  and  therefore 
void  as  between  the  original  parties,  might  be  equally  void  in  the 
hands  of  a  subsequent  holder  who  took  it  with  notice  of  the  original 
illegality.  Even  if  the  note  bore  date  of  a  Sunday,  however,  that 
mere  fact  would  not  be  conclusive  evidence  that  he  took  it  with  such 
notice;  for,  though  dated  on  Sunday,  it  might  have  been  delivered 
on  another  day  and  so  valid  even  as  between  original  parties. 

In  the  present  case,  it  is  agreed  that  the  contract  which  was  the 
consideration  of  the  note  in  suit  was  made  on  Sunday,  and  that  the 
note  was  made,  signed  and  fully  delivered  on  Sunday  to  the  original 
payee.  Clearly  therefore  he  could  not  have  maintained  an  action 
upon  it. 

But  it  is  also  agreed  that  the  note  bears  date  of  a  secular  day; 
and  that  the  plaintiff  is  a  bona  fide  holder  of  the  note,  for  a  valuable 
consideration,  and  took  it  before  it  became  due,  without  notice  of  any 
defect,  illegality  or  other  infirmity  in  the  same.  The  plaintiff  there- 
fore, not  having  participated  in  any  violation  of  law,  and  having 
taken  the  note  before  its  maturity  for  good  consideration  and  without 
notice  of  any  illegality  in  its  inception,  may  maintain  an  action  thereon 
against  the  maker.  To  hold  otherwise  would  be  to  allow  that  party, 
who  alone  had  been  guilty  of  a  breach  of  the  law,  to  set  up  his  own 
illegal  act  as  a  defense  to  the  suit  of  an  innocent  party.  This  view 
is  supported  by  the  judgments  of  all  the  courts,  English  and  American, 
that  have  considered  the  question.  And  it  is  in  accordance  with  the 
decisions  of  this  court  upon  notes  made  in  violation  of  other  statutes, 
except  those  against  usury  and  gaming,  which  last  have  often  con- 
tained peculiar  provisions,  and,  as  observed  by  Chief  Justice  Shaw, 
"declared  that  the  note  should  be  absolutely  void  to  all  intents  and 
purposes,  or,  as  is  sometimes  said,  applied  to  the  contract  and  not 
to  the  party." 


l6o  COMMERCIAL    LAW    CASES 

7.     Agreement  to  Violate  Statute:    Dealing  in  Futures. 

Irunn  v.  Williar.  no  U.  S.  4Qp. 

Irwin  and  Davis  operated  a  flour  mill  in  Indiana,  Davis  had 
bought  wheat  futures  of  the  plaintiff,  Williar,  in  Baltimore. 
After  the  death  of  Davis,  Williar  sues  Irwin,  as  surviving  partner, 
to  recover  a  balance  due  on  these  transactions.  Irwin  defends 
upon  the  ground  that  the  contract  was  a  gambling  contract,  and 
therefore  illegal. 

Held,  that  a  contract  for  the  purchase  and  sale  of  goods  for 
future  delivery  is  valid  unless  the  parties  intend  merely  to  spec- 
ulate in  the  rise  and  fall  of  prices,  and  the  goods  are  not  to  be 
delivered. 

Matthews,  J. 

The  generally  accepted  doctrine  in  this  country  is,  that  a  contract 
for  the  sale  of  goods  to  be  delivered  at  a  future  day  is  valid,  even 
though  the  seller  has  not  the  goods,  nor  any  other  means  of  getting 
them  than  to  go  into  the  market  and  buy  them;  but  such  a  contract 
is  only  valid  when  the  parties  intend  and  agree  that  the  goods  are 
to  be  delivered  by  the  seller  and  the  price  to  be  paid  by  the  buyer; 
and,  if  under  guise  of  such  a  contract,  the  real  intent  be  merely  to 
speculate  in  the  rise  or  fall  of  prices,  and  the  goods  are  not  to  be 
delivered,  but  one  party  is  to  pay  to  the  other  the  difference  between 
the  contract  price  and  the  market  price  of  the  goods  at  the  date  fixed 
for  executing  the  contract,  then  the  whole  transaction  constitutes 
nothing  more  than  a  wager,  and  is  null  and  void.  And  this  is  now 
the  law  in  England  by  statute  altering  the  common  law  in  that  respect. 

Brokers  who  [have]  negotiated  such  contracts,  suing  not  on  the 
contracts  themselves,  but  for  services  performed  and  money  advanced 
for  defendant  at  his  request,  though  they  might  under  some  circum- 
stances be  so  connected  with  the  immorality  of  the  contract  as  to  be 
affected  by  it,  are  not  in  the  same  position  as  a  party  sued  for  the 
enforcement  of  the  original  agreement.  It  is  certainly  true  that  a 
broker  might  negotiate  such  a  contract  witbout  being  privy  to  the 
illegal  intent  of  tlie  principal  parties  to  it  which  renders  it  void,  and 
in  such  a  case,  being  innocent  of  any  violation  of  law,  and  not  suing 
to  enforce  an  unlawful  contract,  has  a  meritorious  ground  for  the 
recovery  of  comj)cnsation  for  services  and  advances.  But  we  are 
also  of  the  opinion  that  when  the  broker  is  privy  to  the  unlawful 
design  of  the  parties,  and  brings  tliem  together  for  the  very  purpose 
of  entering  into  an  illegal  agreement,  he  is  particeps  criminis.  and 
cannot  recover  for  services  rendered  or  losses  incurred  by  himself 
on  bebalf  of  either  in  forwarding  the  transaction. 

In  England,  it  is  held  that  |  such  |  contracts,  although  wagers, 
were  not  void  at  common  law,  and  that  the  statute  has  not  made  them 
illegal,  but  only  non-enforceable,  while  generally,  in  this  country,  all 


FORMATION  OF  CONTRACTS  l6l 

wagering  contracts  are  held  to  be  illegal  and  void  as  against  public 
policy. 

8.     Agreement  to  Violate  Statute:  Bucket  Shops. 

Smith  V.  Western  Union  Telegraph  Co.  84  Ky.  664. 

Smith  ran  a  bucket  shop.  The  Telegraph  Company  refused 
to  continue  its  ticker  service  for  him  unless  he  would  agree  to  sign 
a  contract  to  send  by  it  all  his  messages  at  message  rates.  This 
he  refused  to  do.  and  sues  to  restrain  the  Company  from  discon- 
tinuing the  ticker. 

Held,  that  a  bucket  shop  is  illegal,  and  that  a  carrier  of  mes- 
sages will  not  be  required  to  deal  with  it. 

Bennett,  J . 

We  are  satisfied  from  the  proof  in  the  case  that  the  contract  with 
the  appellee,  by  which  appellant  was  furnished  with  the  market 
reports  and  the  use  of  the  "ticker,"  was  necessary  to  enable  the 
appellant  to  carry  on  the  business.  In  this  kind  of  business  nothing 
is  actually  bought  or  sold;  nor  do  the  parties  intend  an  actual  sale 
of  the  commodity  which  they  pretend  to  deal  in.  They  merely  wager 
on  the  market  price  of  the  commodity  at  some  specified  time  in  the 
future.  A  mere  statement  of  the  character  of  business  done  by 
appellant  shows  it  to  be  a  species  of  gambling  as  well  defined  and 
as  reprehensible  as  that  of  keeping  a  faro  bank  or  a  dice  machine, 
and  is,  therefore,  illegal  and  contrary  to  public  policy. 

The  question  then  is,  can  the  appellee  avail  itself  of  the  fact  that 
appellant  was  engaged  in  an  illegal  business  as  an  excuse  for  with- 
holding the  market  reports  from  him  and  withdrawing  the  ticker, 
both  of  which  were  used  by  appellant  in  carrying  on  said  business. 

The  law  goes  further  than  merely  to  annul  contracts,  where  the 
obvious  and  avowed  purpose  is  to  do,  or  cause  the  doing  of,  unlawful 
acts ;  it  avoids  contracts  and  promises  made  with  a  view  to  place  one 
under  wrong  influences ;  those  which  offer  him  a  temptation  to  do  that 
which  may  injuriously  affect  the  rights  and  interests  of  third  persons. 

These  reports  were  the  essence — the  very  sinew — of  appellant's 
gambling  business,  and  without  the  prompt  supply  of  which  his  busi- 
ness was  a  failure.  Can  the  appellee  be  compelled  to  continue  the 
supply  ?  We  think  not.  Not  upon  the  ground  that  the  appellee  is 
the  innocent  victim  of  an  illegal  enterprise ;  not  that  it  has  been 
entrapped  into  aiding  a  gambling  business ;  for  it  says  that  it  was 
willing  to  furnish  the  reports  as  long  as  the  terms  of  the  contract 
suited  it,  but  upon  the  ground  that  appellant  was  engaged  in  a 
gambling  enterprise,  which  is  contrary  to  law,  good  morals  and  public 
policy.  It  is  for  the  sake  of  the  law  and  the  best  interests  of  society 
that  we  relieve  the  appellee  from  continuing  to  furnish  to  appellant 
the  reports. 


l62  COMMERCIAL    LAW    CASES 

It  is  contended,  that,  although  the  appellant  may  be  engaged  in 
a  gambling  business,  the  appellee  has  no  right  to  withhold  the  reports 
from  him  because  of  its  position  as  a  public  servant,  bound  to  serve 
the  public  indiscriminately  and  without  questioning  the  motives  or 
the  purposes  of  the  persons  who  employ  it. 

The  general  rule  is,  that  a  telegraph  company  is  under  no  obli- 
gation to  contract  to  communicate  an  illegal  or  an  immoral  message. 

This  rule  is  not  only  correct  as  to  telegraph  companies,  but  it 
applies  to  all  persons  who  undertake  to  carry  for  the  public.  A  con- 
trary rule  would  convert  a  telegraph  company  into  a  public  vehicle 
for  the  purpose  of  communicating  unlawful,  treasonable  or  felonious 
schemes  of  all  kinds,  or  the  consummation  of  any  and  all  kinds  of 
illegal  transactions  and  enterprises.  Of  course,  a  telegraph  company, 
in  assuming  to  refuse  to  send  a  message  because  it  is  illegal  or 
immoral,  acts  upon  its  peril.  If  it  is  mistaken,  or  has  misjudged  the 
tenor  or  purpose  of  the  message,  it  would  be  held  responsible  to  the 
injured  party  for  any  damage  sustained  by  reason  of  the  refusal. 

g.    Agreement  to  Violate  Statute :    Lotteries. 

Hull  V.  Ruggles.  56  N.   Y.  424. 

Hull  sold  Ruggles'  firm  candy  and  silverware,  the  candy  being 
put  up  in  prize  packages,  some  of  which  contained  tickets  entitling 
the  holder  to  a  special  piece  of  silverware.  In  an  action  by  the 
seller  for  the  price,  the  defense  is  that  the  contract  was  for  pur- 
poses of  a  lottery,  and  hence  illegal. 

Held,  that  a  consideration  to  be  acquired  by  chance  or  lot  is 
a  lottery,  and  that  a  contract  based  upon  it  is  void. 

Folgcr,  J . 

The  Revised  Statutes  declare  that  every  lottery,  game,  or  device 
of  chance  in  the  nature  of  a  lottery,  by  whatsoever  name  it  may  be 
called,  other  than  such  as  have  been  authorized  by  law,  shall  be 
deemed  unlawful.  It  must  have  been  set  on  foot  for  the  purpose 
of  disposing  of  property.  It  cannot  be  doubted,  but  that  the  purpose 
of  the  defendants,  in  contracting  for  the  goods  sold  to  them  by  the 
plaintiff,  was  to  dispose  of  them  to  the  public  at  more  than  their  real 
value.  This  was  to  be  effected  by  the  incitement  and  temptation  held 
out  to  each  purchaser,  and  while  he  paid  more  than  the  real  value 
of  the  package  that  he  bought,  he  also  bought  the  chance  of  obtaining 
another  article  much  exceeding  in  value  the  price  paid.  He  would 
it  is  true  get  some  real  value,  but  so  much  less  than  the  price  that 
he  paid,  that  he  would  not  have  been  likely  to  pay  that  sum  for  it, 
but  for  the  chance,  and  the  hope  excited  by  the  chance,  that  he  might 
also  get  therefor  another  article  of  greater  value  than  the  amount 
paid.  This  was  a  lottery  within  the  meaning  of  the  statute.  It  was 
to  set  up  chattels  to  be  distributed  by  lot  to  any  person  who  should 


FORMATION    OF    CONTRACTS  163 

have  paid  a  valuable  consideration  for  the  chance  of  obtaining  such 
chattels.  It  was  a  lottery,  or  device  of  chance  in  the  nature  of  a 
lottery.  It  is  directly  within  the  definition  of  Worcester:  "A  hazard 
in  which  sums  are  ventured  for  the  chance  of  obtaining  a  greater 
value." 

Where  a  pecuniary  consideration  is  paid,  and  it  is  determined  by 
lot  or  chance,  according  to  some  scheme  held  out  to  the  public,  what 
and  how  much  he  who  pays  the  money  is  to  have  for  it,  that  is  a  lottery. 
It  was  unauthorized  by  law.  It  therefore  fell  within  the  prohibition 
of  the  statute. 

We  are  not  left  to  the  rules  of  the  common  law  alone  to  determine 
whether  this  conclusion  of  law  is  correct.  The  statutes  against  lot- 
teries have  provisions  touching  the  subject.  Section  38  of  the  Revised 
Statutes  above  cited  declares  that  every  sale  of  any  goods,  for  the 
purpose  of  aiding  in  a  lottery  is  void  and  of  no  effect.  It  is  difficult 
to  perceive  how  a  sale  of  goods  so  packed  and  arranged  as  to  enable 
the  purchaser,  without  alteration  or  readjustment  of  them,  to  carry 
out  a  scheme,  which  when  accomplished  is  an  unlawful  lottery ;  and 
sold  thus  with  knowledge,  or  with  reasonable  cause  for  belief,  that 
the  purchaser  by  the  disposal  to  the  public  of  the  goods  thus  arranged 
intended  to  violate  the  statutes  against  lotteries,  is  not  a  sale  for  the 
purpose  of  aiding  in  such  lotterj'.     It  cannot  be  otherwise. 


10.     Agreement  to  Violate  Statute:    Usury. 

Lloyd  V.  Scoff.  4  Peters  (U.  S.)  205. 

Scholfield  granted  Moore  an  annual  rent  charge  of  $500  on 
certain  lands  belonging  to  him  in  consideration  of  a  payment  of 
$5,000  by  Moore  to  Scholfield.  The  incumbrance  might  be  dis- 
charged at  any  time  on  the  payment  of  $5,000  by  Moore.  Schol- 
field then  sold  the  land  subject  to  the  terms  of  this  agreement  to 
Lloyd,  the  plaintiff.  A  statute  of  Virginia  prohibited  the  taking 
of  more  than  6%  interest,  whether  directly  or  indirectly.  This 
action  is  brought  by  Lloyd  to  recover  goods  and  chattels  which 
Scott,  on  behalf  of  Moore,  had  taken  on  default  of  one  payment 
of  the  annuity. 

Held,  that  under  a  statute  prohibiting  the  taking  of  more  than 
a  certain  rate  of  interest,  the  contract  is  void. 

M'Lean,  J. 

The  requisites  to  form  an  usurious  transaction  are  three : 

1.  A  loan  either  express  or  implied. 

2.  An  understanding  that  the  money  lent  shall  or  may 
be  returned. 

3.  That  a  greater  rate  of  interest  than  is  allowed  by  the 
statute,  shall  be  paid. 


164  COMMERCIAL    LAW    CASES 

The  intent  with  which  the  action  is  done,  is  an  important  in- 
gredient to  constitute  this  offense.  An  ignorance  of  the  law  will 
not  protect  a  party  from  the  penalties  of  usury,  where  it  is  committed ; 
but  where  there  is  no  intention  to  evade  the  law,  and  the  facts  which 
amount  to  usury,  whether  they  appear  upon  the  face  of  the  contract, 
or  by  other  proof,  can  be  shown  to  have  been  the  result  of  mistake 
or  accident,  no  penalty  attaches. 

At  an  early  period  in  the  history  of  English  jurisprudence,  usury, 
or  as  it  was  then  called,  the  loaning  of  money  at  interest,  was  deemed 
a  very  high  offense.  But  since  the  days  of  Henry  VIII,  the  taking 
of  interest  has  been  sanctioned  by  statute. 

In  this  country,  some  of  the  states  have  no  law  against  taking  any 
amount  of  interest,  which  may  be  fixed  by  the  contract. 

The  act  of  usury  has  long  since  lost  that  deep  moral  stain  which 
was  formerly  attached  to  it ;  and  is  now  generally  considered  only  as 
an  illegal  or  immoral  act  because  it  is  prohibited  by  law. 

The  purchase  of  an  annuity,  or  any  other  device  used  to  cover 
an  usurious  transaction,  will  be  unavailing.  If  the  contract  be  in- 
fected with  usury,  it  cannot  be  enforced. 

Where  an  annuity  is  raised  with  the  design  of  covering  a  loan, 
the  lender  will  not  be  exempted  by  it  from  the  penalties  of  usury. 
On  this  point  there  is  no  contradiction  in  the  authorities. 

If  a  party  agree  to  pay  a  specific  sum  exceeding  the  lawful  in- 
terest, provided  he  do  not  pay  the  principal  by  a  day  certain,  it  is  not 
usury.  By  a  punctual  payment  of  the  principal  he  may  avoid  the 
payment  of  the  sum  stated,  which  is  considered  as  a  penalty. 

Where  a  loan  is  made  to  be  returned  at  a  fixed  day  with  more 
than  the  legal  rate  of  interest,  depending  upon  a  casualty  which 
hazards  both  principal  and  interest,  the  contract  is  not  usurious;  but 
where  the  interest  only  is  hazarded,  it  is  usury. 

The  principle  seems  to  be  settled,  that  usurious  securities  are  not 
only  void  as  between  the  original  parties,  but  the  illegality  of  their 
inception  affects  them  even  in  the  hands  of  third  persons  who  are 
entire  strangers  to  the  transaction.  A  stranger  must  "take  heed  to 
his  assurance,  at  his  peril";  and  cannot  insist  on  his  ignorance  of 
the  contract,  in  support  of  his  claim  to  recover  upon  a  security  which 
originated  in  usury. 

II.     Agreement  Against  Public  Policy:    Influencing  Official 
Action. 

Brooks  V.  Cooper.   50  N.  J.  E.  ySr. 

Cooper  published  the  "Gazette"  and  Brooks  the  "Star  of  the 
Cape,"  both  newspapers  in  Cape  May  County,  N.  J.  They  agreed 
that  the  acts  of  the  legislature  should  l)e  published  by  the  ".Star 
of  the  Cape"  and  that  both  newspapers  should  divide  the  profits. 
An  act  of  the  legislature  empowered  the  governor  and  other  officers 


FORMATION    OF    CONTRACTS  1 65 

to  select  a  newspaper  in  each  county  to  publish  such  acts.     A  bill 
in  equity  is  brought  by  Cooper  to  compel  division  of  the  profits. 
Held,  that  the  contract  was  against  public  policy  and  void. 

Lippincott,  J. 

The  contract  not  being  fulfilled  between  the  parties,  the  question 
arises,  Can  it  be  enforced,  or  is  it  so  manifestly  contrary  to  public 
policy,  in  contravention  of  the  statute,  and  so  injurious  to  the  public 
good,  that  it  defeats  itself? 

In  determining  this  there  must  be  kept  in  view  the  general  rule 
of  law  that,  where  there  is  no  statutory  prohibition,  the  law  will  not 
readily  pronounce  an  agreement  invalid  on  the  ground  of  policy  or 
convenience,  but  is,  on  the  contrary,  inclined  to  leave  men  free  to 
regulate  their  afifairs  as  they  think  proper.  Where,  however,  a 
contract  is  of  such  a  nature  that  it  cannot  be  carried  into  execution 
without  reaching  beyond  the  parties  and  exercising  an  injurious 
influence  over  the  community  at  large,  everyone  has  an  interest  in 
its  suppression  and  it  will  be  pronounced  void  from  a  due  regard  to 
the  public  welfare. 

Now,  it  is  only  upon  judicial  determination  that  a  contract  contra- 
venes the  policy  of  some  public  statute,  or  some  well  known  rule  of 
law,  that  it  is  held  to  be  void. 

Turning  to  the  judicial  decisions  upon  this  subject,  we  find  them 
so  numerous  and  of  such  variety  that  a  consideration  of  them  at  any 
length  is  not  practicable.  The  general  principles  governing  the 
matter  are  well  established  by  a  long  line  of  authorities,  and  in  the 
case  now  before  the  court  they  do  not  appear  to  be  of  difficult 
application. 

It  has  been  declared  that  public  policy  is  a  variable  quality,  but 
the  principles  to  be  applied  have  always  remained  unchanged  and 
unchangeable,  and  public  policy  is  only  variable  in  so  far  as  the  habits, 
capacities  and  opportunities  of  the  public  have  become  more  varied 
and  complex.  The  relations  of  society  become  from  time  to  time 
more  complex;  statutes  defining  and  declaring  public  and  private 
rights  multiply  rapidly,  and  public  policy  often  changes  as  the  laws 
change,  and  therefore  new  applications  of  old  principles  are  required. 

Whatever  tends  to  injustice  or  oppression,  restraint  of  liberty, 
restraint  of  legal  right;  whatever  tends  to  the  obstruction  of  justice, 
a  violation  of  a  statute,  or  the  obstruction  or  perversion  of  the 
administration  of  the  law ;  whatever  tends  to  interfere  with  or  control 
the  administration  of  the  law  as  to  executive,  legislative  or  other 
official  action,  whenever  embodied  in  and  made  the  subject  of  a 
contract,  the  contract  is  against  public  policy  and  therefore  void  and 
not  susceptible  of  enforcement. 

Any  contracts  which  have  for  their  object  the  influencing  the 
action  of  public  officials  are  void  as  against  public  policy.  An  agree- 
ment whose  object  or  tendency  is  to  influence  any  officer  of  the  state 
in  the  performance  of  a  legal  duty,  partially  or  completely,  is  void. 


1 66  COMMERCIAL    LAW    CASES 

It  is  distinctly  held  that  an  agreement  for  compensation  for  procuring 
a  contract  from  the  government  of  our  own,  or  that  of  another, 
country,  is  against  public  policy  and  void.  An  agreement  between 
two  candidates  for  the  same  office,  that  one  shall  withdraw,  and  the 
other,  if  successful  in  the  attempt  to  obtain  the  office,  shall  divide  the 
fees  with  him,  is  void  as  against  sound  public  policy.  All  agreements, 
for  financial  consideration,  to  control  or  influence  the  business  opera- 
tions of  the  government,  or  the  appointment  of  public  officers,  are 
void  as  against  public  policy,  without  reference  to  the  question 
whether  improper  measures  are  contemplated  or  used  in  their  execu- 
tion. The  law  looks  to  the  general  tendency  of  such  agreements, 
and  it  closes  the  door  to  temptations  by  refusing  them  recognition  in 
the  courts.  And  so  considerations  of  the  same  kind,  of  inferior 
moment,  apply,  whenever  the  necessary  or  even  probable  effect  of 
the  contract  will  be  to  divert  any  public  servant  from  the  path  of  duty, 
or  cause  favoritism  or  interest  to  prevail  in  the  determination  of 
questions  which  should  be  examined  with  a  view  to  the  general  good 
and  the  just  claims  of  the  parties  in  interest. 

Such  an  agreement  as  the  one  now  under  consideration  is  simply, 
in  plain  language,  a  financial  bargain  between  two  seekers  after  public 
position  to  get  one  or  the  other  out  of  the  way,  so  that  the  other 
may  succeed  in  obtaining  it,  and  it  must  be  held  illegal  and  void. 


12.     Agreement   Against   Public   Policy:     Ousting   Court   of 
Jurisdiction. 

Miles  V.  Schmidt.  i68  Mass.  339. 

The  plaintiff  sues  on  a  written  contract  which  contained  a  pro- 
vision that  in  case  of  any  alleged  violation  thereof,  the  dispute 
should  be  settled  by  referees  whose  decision  should  be  final. 

Held,  that  a  contract  ousting  the  courts  from  their  jurisdiction 
is  illegal  and  void. 

Morton,  J . 

Perhaps,  if  the  question  were  a  new  one,  no  objection  would  be 
found  to  permitting  parties  to  select  their  own  tribunals  for  the  settle- 
ment of  civil  controversies,  even  though  the  result  might  be  to  oust 
the  courts  of  jurisdiction  in  such  cases.  But  the  law  is  settled  other- 
wise in  this  state.  When  the  question  is  a  preliminary  one,  or  in  aid 
of  an  action  at  law  or  suit  in  equity,  such,  for  instance,  as  the  ascer- 
tainment of  damages,  an  agreement  for  arbitration  will  be  upheld. 
The  agreement  for  arbitration  in  this  case  expressly  provided,  amongst 
other  things,  that  the  referee  shall  "hear  the  parties  and  determine 
whether  or  not  there  has  been  any  violation  and  what  damage  either 
party  has  sustained,"  and  that  "the  decision  of  a  majority  shall  be 
final  and  binding." 


FORMATION    OF    CONTRACTS  1 6/ 

13.    Agreement  Against  Public  Policy:    Secret  Advantage  in 
Composition  with  Creditors. 

The  Hanover  National  Bank  v.  Blake.  142  N.  Y.  404. 

Blake  &  Company  effected  a  composition  with  creditors  for 
forty  cents  on  the  dollar,  paid  by  four  notes,  the  last  two  of  which 
were  indorsed  by  Mrs.  Blake.  The  bank,  one  of  the  creditors, 
insisted  upon  her  indorsing  all  of  the  notes.  It  now  sues  Mrs. 
Blake  upon  the  third  of  these  notes,  the  defense  being  that  the 
agreement  whereby  the  bank  received  a  greater  security  than  the 
other  creditors  made  the  whole  transaction  void  as  against  public 
policy. 

Held,  that  although  any  advantage  acquired  by  one  creditor 
over  the  other  parties  to  a  composition  is  void,  according  to  the 
New  York  rule,  the  entire  composition  is  not  therefore  avoided. 

Gray,  J. 

The  general  principle  has  been  long  settled  in  England  and  here 
that  a  secret  agreement  which  induces  a  creditor  to  agree  to  a  com- 
position by  the  promise  of  a  preference,  or  of  some  undue  advantage, 
over  the  other  creditors,  is  utterly  repugnant  to  the  composition  agree- 
ment, and.  from  its  fraudulent  nature,  is  avoided  by  the  law.  The 
very  essence  of  a  composition  agreement  is  that  all  creditors  come 
in  upon  terms  of  equality ;  and  that  equality  would  be  destroyed  if 
the  secret  agreement  were  given  effect.  Where  the  creditors  in 
general  have  bargained  for  an  equality  of  benefit  and  mutuality  of 
security,  it  shall  not  be  competent  for  one  of  them  to  secure  any 
partial  benefit  or  security  to  himself. 

From  all  the  early  cases  in  England  and  in  this  state  the  inference 
from  the  decisions  is,  not  that  the  composition  agreement  is  avoided 
[by  the  secret  giving  of  additional  security],  but  the  security  taken 
for  an  amount  beyond  the  composition  agreed  upon,  or  even  for  that 
sum,  better  than  that  which  is  common  to  all,  is  void  and  inoperative. 
The  law  would  set  aside  all  secret  terms  made  by  the  creditors  with 
the  debtor,  more  favorable  to  the  former  than  is  allowed  to  the  other 
creditors.  It  is  the  secret  agreement  itself  which  is  fraudulent  and 
void. 

It  would  certainly  seem  to  be  the  logical  outcome  of  the  propo- 
sition asserted  below  that,  if  the  composition  agreement  has  been 
avoided,  it  has  become  inoperative  as  an  agreement  for  any  purpose. 
We  assert  a  wholesome  rule  and  one  which  works  a  just  result,  if  we 
hold  that  the  secret  and  fraudulent  agreement,  itself,  is  illegal  and  is 
inoperative  to  confer  any  rights  or  advantages  upon  the  creditor. 
Perfect  equality  is  to  be  maintained  among  the  creditors.  It  was 
thought  that  the  secret  agreement  and  the  composition  agreement 
constituted  but  a  single  and  indivisible  transaction  or  agreement. 
I  am  not  prepared  to  accede  to  that  proposition ;  though  it  has  support 


1 68  COMMERCIAL   LAW    CASES 

in  some  English  cases.  It  seems  to  me  the  case  falls  easily  within 
the  rule,  which  permits  a  severance  of  the  illegal  from  a  legal  part 
of  the  covenant. 

Here  the  agreement  with  other  creditors  for  a  composition  was 
lawful  and  valid  (unless  they  should  elect  to  rescind  it  upon  the  dis- 
covery of  the  secret  agreement,  an  element  not  present)  ;  but  the 
agreement  for,  and  the  giving  of,  additional  security  was  unlawful 
and  void.  Is  there  any  reason  why  the  bad  may  not  be  rejected  and 
the  good  retained?  We  should  be  careful,  in  our  desire  to  punish 
the  harsh  and  unscrupulous  creditor,  who  presses  his  debtor  and 
bargains  for  an  advantage  over  other  creditors,  by  deprivation  of 
legal  rights  and  remedies,  that  we  do  not  go  too  far  and  lay  down  a 
rule  which  may  result  unjustly  in  other  ways.  It  ought  not  to  be 
possible  that  through  his  fraud  he  may  be  reinstated  in  his  original 
position  as  a  creditor  for  the  whole  sum  due.  The  operation  of  a 
secret  agreement  is  such  that  the  other  innocent  creditors  may,  because 
of  the  fraud  of  their  debtor,  elect  to  refuse  to  be  bound  by  their 
agreement  of  composition  with  him.  If  the  secret  agreement  is 
executory  they  may  not  so  elect,  and  may  rely  that  the  creditor, 
secretly  seeking  to  obtain  some  promise  of  advantage  over  them,  will 
be  prevented  from  enforcing  it  and  from  gaining  anything  by  his 
fraud.  Its  illegality  is  a  perfect  defense  in  the  hands  of  the  promisor. 
The  composition  agreement  is  one  thing,  as  an  agreement  between 
all  the  creditors  to  release  some  part  of  the  insolvent's  indebtedness 
to  them,  upon  terms  equal  as  to  each ;  and  the  secret  fraudulent  agree- 
ment with  one  or  more  of  them  is  a  stipulation,  which,  from  its 
inception,  was  unlawful  and  which  the  law  annuls.  It  seems  wiser 
simply  to  'regard  the  secret  agreement  as  one  which  the  law  avoids 
for  its  fraud.  The  creditor  makes  it  with  the  risk  of  its  worthlessness, 
if  repudiated,  and  the  debtor  makes  it  with  the  peril  that  its  discovery 
will  furnish  cause  for  his  other  creditors  to  avoid  the  composition 
agreement. 


14.     Agreement  Against  Public  Policy:    Secret  Advantage  in 
Composition  with  Creditors.    (Conflicting  Rule.) 

Frost  V.  Gage,  j  Allen  (Mass.)  ^60. 

Richard  Frost  made  a  composition  with  creditors.  Gage  being 
the  assignee.  In  order  to  get  Gage  to  assent  to  the  assignment. 
Frost's  son,  also  a  creditor,  agreed  to  make  no  claim  for  a  dividend 
against  Gage  and  to  give  him  a  note  for  part  of  the  debt  due 
Gage  from  his  father.  The  son  now  seeks  his  share  of  the  estate, 
in  spite  of  this  agreement. 

Held,  that  according  to  the  Massachusetts  rule  any  fraud  upon 
creditors  in  a  composition  with  them  vitiates  the  entire  transaction 
as  to  persons  parlicii)ating  in  the  fraud. 


FORMATION  OF  CONTRACTS  I69 

Bigelozv,  C.  J. 

The  fraud  in  which  [the  plaintiff]  participated,  and  by  which  he 
aided  in  inducing  creditors  to  become  parties  to  the  release  of  their 
debtor,  taints  the  whole  transaction  as  to  him,  and  deprives  him  of 
the  right  of  maintaining  an  action  to  enforce  in  a  court  of  law  that 
part  of  the  agreement  of  composition  to  which  the  secret  agreement 
did  not  immediately  relate. 

It  may  be  suggested  that  the  application  of  this  rule  leads  in  the 
present  case  to  the  result  of  leaving  in  the  hands  of  the  defendant, 
who  was  equally  guilty  with  the  plaintiff,  the  fruits  of  the  fraud. 
But  this  is  often  the  consequence  of  allowing  a  party  to  plead  in 
defense  the  illegality  of  a  transaction  on  which  a  cause  of  action  is 
founded.  Such  defenses  are  allowed,  not  out  of  favor  to  defendants, 
or  to  protect  them  from  the  effects  of  their  unlawful  contracts,  but 
on  the  grounds  of  public  policy,  which  does  not  permit  courts  of 
justice  to  be  used  to  aid  either  party  in  enforcing  contracts  which 
are  unlawful  or  tainted  with  fraud,  but  leaves  them  in  the  condition 
in  which  their  illegal  or  immoral  acts  have  placed  them. 

15.     Agreement  Against  Public  Policy:    Restraint  of  Trade. 

Anchor  Electric  Co.  v.  Haivkes.  iji  Mass.  loi. 

The  Anchor  Electric  Company  sues  to  enforce  the  terms  of  a 
contract  between  itself  and  Hawkes,  who  had  sold  his  interest 
in  a  business  to  the  Anchor  Company,  and  had  agreed  not  to 
compete  with  it  for  a  period  of  five  years. 

Held,  that  an  agreement  for  a  reasonable  restraint  of  trade  is 
not  illegal  and  will  be  made  efifective. 

Knowlton,  J. 

From  very  early  times  certain  contracts  in  restraint  of  trade  have 
been  held  void  as  against  public  policy.  They  are  objectionable  on 
two  grounds :  they  tend  to  deprive  the  party  restrained  of  the  means 
of  earning  a  livelihood,  and  they  deprive  the  community  of  the  benefit 
of  his  free  and  unrestricted  efforts  in  his  chosen  field  of  activity. 
The  distinction  was  long  ago  taken  between  contracts  involving  a 
partial  restraint  of  trade  and  contracts  involving  a  general  restraint 
of  trade,  the  former  being  held  valid  if  not  unreasonable,  and  the 
latter  invalid.  The  changes  in  the  methods  of  doing  business  and  the 
increased  freedom  of  communication  which  have  come  in  recent  years 
have  very  materially  modified  the  view  to  be  taken  of  particular 
contracts  in  reference  to  trade.  The  comparative  ease  with  which 
one  engaged  in  business  can  turn  his  energies  to  a  new  occupation, 
if  he  contracts  to  give  up  his  old  one,  makes  the  hardship  of  such  a 
contract  much  less  for  the  individual  than  formerly,  and  the  com- 
mercial opportunities  which  open  the  markets  of  the  world  to  the 


I/O  COMMERCIAL    LAW    CASES 

merchants  of  every  country  leave  little  danger  to  the  community 
from  an  agreement  of  an  individual  to  cease  work  in  a  particular 
field.  The  general  principle  that  arrangements  in  restraint  of  trade 
are  not  favored  is,  however,  firmly  established  in  law,  and  now,  as 
well  as  formerly,  is  given  effect  whenever  its  application  will  not 
interfere  with  the  right  of  everybody  to  make  reasonable  contracts. 
Whenever  one  sells  a  business  with  its  good  will,  it  is  for  his  benefit, 
as  well  as  for  the  benefit  of  the  purchaser,  that  he  should  be  able  to 
increase  the  value  of  that  which  he  sells  by  a  contract  not  to  set  up 
a  new  business  in  competition  with  the  old.  The  right  to  make 
reasonable  contracts  of  this  kind  in  connection  with  the  sale  of  the 
good  will  of  a  business  is  well  established.  But  the  particular  pro- 
visions which  are  reasonably  necessary  for  the  protection  of  the  good 
will  of  many  kinds  of  business  are  very  different  now  from  those 
required  in  the  daj's  of  Queen  Elizabeth.  Then  the  courts  had 
occasion  to  inquire  whether  a  limitation  upon  the  right  to  engage  in 
the  same  business  as  that  sold  was  unreasonable  because  it  included 
a  town  instead  of  a  single  parish,  or  extended  a  distance  of  ten  miles 
instead  of  five.  Xow  the  House  of  Lords  in  England  has  held  by 
a  unanimous  decision  in  a  recent  case  that  such  a  limitation  which 
covered  the  whole  world  was  not  unreasonable.  Because  in  early 
times  it  seemed  inconceivable  that  an  agreement  to  refrain  from 
establishing  a  business  of  the  same  kind  anywhere  in  the  kingdom 
should  be  necessary  to  the  protection  of  the  good  will  of  any  existing 
business,  it  was  laid  down  as  an  arbitrary  rule  that  agreements  so 
comprehensive  in  their  terms  were  void.  Thus  the  distinction 
between  a  general  restraint  of  trade  and  a  partial  restraint  of  trade 
grew  up.  Contracts  applying  to  any  territory  less  than  the  whole 
kingdom  were  considered  in  reference  to  their  reasonableness,  having 
regard  to  the  purpose  for  which  tlje  contract  was  made.  By  the 
unanimous  decision  of  the  House  of  Lords,  it  is  now  settled  in 
England  that  a  covenant  unrestricted  as  to  space,  not  to  engage  in 
a  particular  kind  of  business  for  twenty-five  years,  made  in  connection 
with  the  sale  of  the  property  of  a  manufacturing  establishment,  is 
valid,  if,  having  regard  to  the  nature  of  the  business  and  the  limited 
number  of  its  customers,  it  is  not  wider  than  is  necessary  for  the 
protection  of  the  covenantee,  nor  injurious  to  the  public  interests  of 
the  country,  as  were  found  to  be  the  facts  of  that  case.  Arbitrary 
rules  which  were  originally  well  founded  have  thus  been  made  to 
yield  to  changed  conditions,  and  underlying  principles  are  applied  to 
existing  methods  of  doing  business.  The  tendencies  in  most  of  the 
American  courts  are  in  the  same  direction. 

fin  United  Shoe  Machinery  Co.  v.  Kimball,  193  Mass.  351,  it  is 
stated,  quoting  Anchor  Electric  Co.  v.  Hawkes,  supra,  "Under  this 
rule  in  conceivable  cases,  a  covenant  may  be  valid  which  is  unlimited 
both  in  time  and  space."] 


FORMATION  OF  CONTRACTS  I7I 

16.  Effect  of  Partial  Illegality. 

Eastern  Expanded  Metal  Co.  v.  Webb  Granite  and  Construc- 
tion Co.    ip^  Mass.  J5d. 

The  Metal  Company  sues  to  recover  the  value  of  work  done 
for  the  defendant  under  a  building  contract  which,  unknown  to 
the  plaintiff,  had  in  it  a  specification  which  violated  the  ordinances 
of  the  city  of  Boston,  where  the  work  was  to  be  done.  The 
plaintiff  had  stopped  work  upon  the  discovery  of  the  illegal  provi- 
sion, but  the  defendant  contends  that  it  is  entitled  to  recover 
nothing  on  account  of  the  illegality  of  the  contract. 

Held,  that  when  a  contract  is  partly  legal  and  partly  illegal, 
if  the  two  elements  may  be  separated,  the  plaintiff  may  recover 
under  that  portion  of  the  contract  which  is  legal. 

Knowlton,  C.  J . 

It  has  been  held  in  many  cases  that,  where  the  matters  called  for 
in  the  contract  that  render  it  illegal  do  not  involve  moral  turpitude, 
but  are  merely  rnala  prohibita,  either  party,  while  it  remains  executory, 
may  disaffirm  it  on  account  of  its  illegality  and  recover  back  money 
or  property  that  he  has  advanced  under  it.  If  the  contract  has  been 
executed  the  court  will  not  relieve  either  party  from  the  consequences 
of  his  own  violation  of  law.  But  so  long  as  it  is  entirely  unexecuted 
in  that  part  which  the  law  forbids,  there  is  a  locus  penitentice.  Most 
of  these  cases  relate  to  the  recovery  of  money  or  property  that  has 
been  advanced  under  the  illegal  contract  which  is  subsequently  re- 
pudiated. In  the  present  case  labor  and  materials  for  the  improve- 
ment of  real  estate  were  furnished  by  the  plaintiff.  In  this  Common- 
wealth, when  labor  and  materials  are  furnished  and  used  upon  real 
estate  under  a  special  contract,  and  for  reasons  which  are  not  preju- 
dicial to  the  plaintiff  the  contract  becomes  of  no  effect,  it  is  held  that 
the  party  furnishing  them  may  recover  upon  a  quantum  meruit  for 
their  value  as  a  benefit  to  the  real  estate.  When  labor  and  materials 
have  been  furnished  upon  real  estate  under  a  contract  which  contains 
an  illegal  element  under  a  prohibitory  statute,  and  when  the  contract 
remains  entirely  executory  in  that  part  which  is  illegal,  and  is  dis- 
affirmed because  of  its  illegality,  the  disaffirming  party  has  the  same 
right  to  have  compensation  for  the  benefit  conferred  upon  the  real 
estate  that  he  would  have  to  recover  for  money  or  property  received 
by  the  other  party  before  the  disaffirmance  of  such  a  contract. 

17.  Effect  of  Partial  Illegality. 

Lindsay  v.  Smith.  y8  N.  C.  ^28. 

Lindsay  was  indicted  for  erecting  and  maintaining  a  public 
nuisance  by  constructing  a  dam  across  a  certain  creek.     The  de- 


172  COMMERCIAL    LAW    CASES 

fendants  agreed  for  a  certain  sum  to  maintain  a  ditch  through 
Lindsay's  land,  and  that  the  indictment  should  not  be  prosecuted. 
They  failed  to  construct  the  ditch,  and  Lindsay  sues  for  breach 
of  their  contract. 

Held,  that  when  a  contract,  illegal  in  part,  is  not  divisible,  the 
entire  contract  is  void. 

Bynuiii   J. 

The  general  doctrine  was  admitted,  that  no  executory  contract, 
the  consideration  of  which  is  against  the  public  policy  or  the  laws 
of  the  state,  can  be  enforced  in  a  court  of  justice.  It  was  further 
admitted  that  when  the  consideration  of  a  contract  is  the  compounding 
a  felony,  or  the  suppressing  a  prosecution  of  an  offense  strictly  public 
in  its  character,  such  a  contract  cannot  be  enforced.  But  it  was  con- 
tended that  this  doctrine  applied  only  to  felonies,  or  at  most  to  public 
misdemeanors,  and  that  it  had  no  application  to  offenses,  though 
indictable,  yet  private  in  their  nature,  as  affecting  an  individual  or  a 
community,  as  in  this  case.  In  our  state  it  has  been  decided  directly 
otherwise. 

So  in  civil  cases,  all  contracts  prohibiting  parties  from  bringing 
an  action  and  all  agreements  purporting  to  oust  the  courts  of  their 
jurisdiction;  all  agreements  to  pay  money  to  stifle  or  suppress  evi- 
dence or  to  give  evidence  in  favor  of  one  side  only,  or  not  to  appear 
as  a  witness  in  a  civil  suit ;  all  contracts,  bonds,  indemnities  and  under- 
takings, tending  to  induce  sheriffs,  clerks,  jailors  and  other  public 
officers  to  violate  or  neglect  their  duty  or  made  to  protect  them  from 
the  consequences  of  their  misconduct,  are  absolutely  null  and  void, 
as  contracts  obstructing  or  interfering  with  the  administration  of 
public  justice,  and  as  being  contrary  to  the  public  policy  of  the  law. 

But  counsel  contends  that  there  are  two  covenants  in  this  sealed 
instrument,  and  that  they  are  divisible,  part  being  good,  and  part  bad; 
that  the  contract  of  the  defendants  is  to  do  two  things :  first,  to  dismiss 
the  indictment,  which  is  illegal  and  void,  but  second,  to  cut  and  keep 
up  the  ditch,  which  is  legal  and  valid,  and  is  the  contract  for  the 
breach  of  which  the  action  is  brought.  In  regard  to  this  proposition 
the  general  rule  is  that  if  there  are  several  considerations  for  separate 
and  distinct  contracts,  and  one  is  good  and  the  other  is  bad,  the  one 
may  stand  and  be  enforced,  although  the  other  fails,  under  the  maxim 
utile  per  inutile  non  vitiattir.  But  where  there  is  but  one  entire 
consideration  for  two  several  contracts,  and  one  of  these  contracts 
is  for  the  performance  of  an  illegal  act,  the  whole  is  void,  as  where 
one  sum  is  to  be  paid  for  the  doing  of  a  legal  and  illegal  act.  There 
was  but  one  indivisible  consick'ration  moving  from  tbe  plaintiff,  to 
wit:  the  sum  of  fifty  dollars,  and  for  that  consideration,  the  defendants 
covenanted  to  do  two  things — the  one  legal  and  tlie  other  illegal.  The 
consideration  cannot  be  divided  and  enough  of  it  assigned  to  support 
the  contract  to  cut  and  maintain  the  ditch,  but  it,  as  it  were,  enters 
into  and  sui)i)orts  both  promises. 


FORMATION    OF    CONTRACTS  1 73 

i8.     Effect  of  Withdrawal  from  Illegal  Contract. 

Hermann  v.  Charlesworth.  (ipoj)  2  K.  B.  {Eng.)   12^. 

Miss  Hermann  made  a  contract  with  the  defendant,  editor  of 
the  "Matrimonial  Post  and  Fashionable  Marriage  Advertiser," 
whereby  she  paid  him  £52,  of  which  £47  was  to  be  restored  to  her  in 
nine  months,  should  no  engagement  take  place  within  that  time. 
She  repudiated  this  contract  and  seeks  the  return  of  her  money. 

Held,  that  in  the  case  of  an  illegal  contract,  one  party  may  with- 
draw so  long  as  it  is  executory. 

Collins,  M.  R. 

Assuming  that  the  contract  was  illegal,  it  has  been  contended 
that  there  has  been  such  part  performance  of  the  contract  that  the 
plaintiff  cannot  insist  upon  having  it  undone.  It  is  said  that  this  lady 
comes  to  the  court  setting  up  the  fact  tliat  she  was  party  to  an  illegal 
contract  and  asking  for  relief,  and  that  she  should  not  be  allowed 
to  do  so,  for  though  it  is  true  that  in  modern  times  persons  have  been 
allowed  to  resile  from  illegal  contracts,  they  cannot  do  so  if  any  part 
of  the  illegal  purpose  has  been  accomplished.  For  authority  on  this 
point  I  may  refer  to  the  judgment  in  Barclay  v.  Pearson  (1893),  2  Ch. 
D.  154.  The  learned  judge,  after  considering  several  cases,  referred 
to  Hastelow  v,  Jackson,  8  B.  &  C.  221,  in  these  terms:  "Hastelow  v. 
Jackson  was  an  action  in  which  the  plaintiff  and  one  Wilcoxon  de- 
posited money  in  the  hands  of  a  stakeholder  to  abide  the  event  of  a 
boxing  match  between  them,  and  after  the  battle  the  plaintiff  demanded 
the  whole  sum  from  the  stakeholder  and  threatened  him  with  an  action 
if  he  paid  it  over  to  Wilcoxon.  This  he  nevertheless  did  by  the  direc- 
tion of  the  umpire,  and  it  was  held  that  the  plaintiff  was  entitled  to 
recover  from  him  his  own  stake  as  money  had  and  received  to  his  use." 
Mr.  Justice  Littledale  stated  the  law  very  clearly  and  shortly  thus : 
"If  two  parties  enter  into  an  illegal  contract,  and  money  is  paid  upon 
it  by  one  to  the  other,  that  may  be  recovered  back  before  the  execution 
of  the  contract,  but  not  afterwards.  In  the  case  of  persons  entering 
into  such  a  contract  and  paying  money  to  a  stakeholder,  if  the  event 
happens  and  the  money  is  paid  over  without  dispute,  that  is  considered 
as  a  complete  execution  of  the  contract,  and  the  money  cannot  be 
reclaimed;  but  if  the  event  has  not  happened,  the  money  may  be 
recovered.  With  respect  to  a  stakeholder  there  is  a  third  case,  viz., 
where  the  event  has  happened,  but  before  the  money  has  been  paid 
over,  one  party  expresses  his  dissent  from  the  payment.  Under  such 
circumstances  he  may  recover  it ;  and  perhaps  it  may  then  be  said, 
that  although  the  event  has  happened,  yet  the  contract  is  not  com- 
pletely executed  until  the  money  has  been  paid  over,  and  therefore 
the  party  may  retract  at  any  time  before  that  has  been  done."  Upon 
this  ground  the  common  law  position  of  the  plaintiff  is  made  good. 
Equity  did  not  take  the  view  that  in  the  case  of  a  contract  of  this 


174  COMMERCIAL    LAW    CASES 

particular  kind,  tainted  with  illegality,  a  case  for  relief  could  only  be 
considered  where  there  had  been  a  total  failure  of  consideration.  As 
was  pointed  out  by  Lord  Hardwicke,  equity  reserves  to  itself  the  right 
to  intervene  even  when  something  has  been  done  in  part  performance 
of  the  contract,  or  even  when  the  marriage  has  taken  place.  In 
Tappenden  v.  Randall  [2  Bos.  &  P.  467],  Heath,  J.,  said:  "It  seems 
to  me  that  the  distinction  adopted  by  Mr.  Justice  Buller  between  con- 
tracts executory  and  executed,  if  taken  with  those  modifications  which 
he  would  have  necessarily  applied  to  it,  is  a  sound  distinction.  Un- 
doubtedly there  may  be  cases  where  the  contract  may  be  of  a  nature 
too  grossly  immoral  for  the  Court  to  enter  into  any  discussion  of  it; 
as  where  one  man  has  paid  money  by  way  of  hire  to  another  to 
murder  a  third  person.  But  where  nothing  of  that  kind  occurs,  I 
think  there  ought  to  be  a  locus  penit entice,  and  that  a  party  should 
not  be  compelled  against  his  will  to  adhere  to  the  contract."  Where 
the  parties  to  a  contract  against  public  policy,  or  illegal,  are  not  in 
pari  delicto,  and  where  public  policy  is  considered  as  advanced  by 
allowing  either,  or  at  least  the  more  excusable  of  the  two,  to  sue  for 
relief  against  the  transaction,  relief  is  given  to  him.  I  cite  these  cases 
to  show  that  the  jurisdiction  exercised  by  the  courts  of  equity  was 
broader  than  that  of  the  common  law  courts,  and  was  not  bound  by 
the  hard  and  fast  rule  that  if  anything  had  been  done  in  the  further- 
ance of  an  illegal  contract  the  court  would  not  intervene.  It  seems 
to  me  that,  whether  this  case  is  regarded  from  the  point  of  view  of 
the  common  law  or  from  the  broader  point  of  view  of  the  courts 
of  equity,  we  are  entitled  to  grant  the  relief  asked  for,  and  are  not 
debarred  from  doing  so  by  reason  that  the  defendant  has  taken  certain 
steps  and  incurred  some  expense  towards  carrying  out  his  part  of  the 
contract. 

19.     Agreement  in  Violation  of  the  Law  of  Another  Jurisdic- 
tion. 

Graves  v.  Johnson.  156  Mass.  211. 

Graves'  firm  in  Massachusetts  sold  and  deli^ared  liquor  to 
Johnson,  proprietor  of  a  Maine  hotel,  with  a  view  to  resale  by 
Johnson  in  Maine  in  violation  of  the  law  of  that  state.  Graves 
sues  for  the  price. 

Held,  that  a  contract  to  violate  the  law  of  another  state  is  illegal 
and  void. 

Holmes,  J. 

Of  course  it  would  be  possible  for  an  independent  state  to 
enforce  all  contracts  made  and  to  be  performed  within  its  territory, 
without  regard  to  how  much  they  might  contravene  the  policy  of  its 
neighbors'  laws.  But  in  fact  no  state  pursues  such  a  course  of 
barbarous  isolation.     As  a  general  proposition,  it  is  admitted  that  an 


FORMATION    OF    CONTRACTS  1/5 

agreement  to  break  the  laws  of  a  foreign  country  would  be  invalid. 
The  courts  are  agreed  on  the  invalidity  of  a  sale  when  the  contract 
contemplates  a  design  on  the  part  of  the  purchaser  to  resell  contrary 
to  the  laws  of  a  neighboring  state,  and  requires  an  act  on  the  part 
of  the  seller  in  furtherance  of  the  scheme. 

On  the  other  hand,  plainly,  it  would  not  be  enough  to  prevent  a 
recovery  of  the  price  that  the  seller  had  reason  to  believe  that  the 
buyer  intended  to  resell  the  goods  in  violation  of  law ;  he  must  have 
known  the  intention  in  fact.  As  in  the  case  of  torts,  a  man  has  a  right 
to  expect  lawful  conduct  from  others.  In  order  to  charge  him  with 
the  consequences  of  the  act  of  an  intervening  wrongdoer,  you  must 
show  that  he  actually  contemplated  the  act. 

Between  these  two  e.xtremes,  a  line  is  to  be  drawn.  But  as  the 
point  where  it  should  fall  is  to  be  determined  by  the  intimacy  of  the 
connection  between  the  bargain  and  the  breach  of  the  law  in  the 
particular  case,  the  bargain  having  no  general  and  necessary  tendency 
to  induce  such  a  breach,  it  is  not  surprising  that  courts  should  have 
drawn  the  line  in  slightly  different  places.  It  has  been  thought  not 
enough  to  invalidate  a  sale,  that  the  seller  merely  knows  that  the 
buyer  intends  to  resell  in  violation  even  of  the  domestic  law. 

But  there  are  strong  intimations  in  the  later  Massachusetts  cases 
that  the  law  on  the  last  point  is  the  other  way.  And  the  English 
decisions  have  gone  great  lengths  in  the  case  of  knowledge  of  intent 
to  break  the  domestic  law. 

We  assume  that  the  sale  would  have  taken  place,  whatever  the 
buyer  had  been  expected  to  do  with  the  goods.  But  we  understand 
the  judge  to  have  found  that  the  seller  expected  and  desired  the  buyer 
to  sell  unlawfully  in  Maine,  and  intended  to  facilitate  his  doing  so, 
and  that  he  was  known  by  the  buyer  to  have  that  intent.  The  question 
is  whether  the  sale  is  saved  by  the  fact  that  the  intent  mentioned 
was  not  the  controlling  inducement  to  it.  As  the  connection  between 
the  act  in  question,  the  sale  here,  and  the  illegal  result,  the  sale  in 
Maine — the  tendency  of  the  act  to  produce  the  result — is  only  through 
the  later  action  of  another  man,  the  degree  of  connection  or  tendency 
may  vary  by  delicate  shades.  If  the  buyer  knows  that  the  sale  is 
made  only  for  the  purpose  of  facilitating  his  illegal  conduct,  the 
connection  is  at  the  strongest.  If  the  sale  is  made  with  the  desire  to 
help  him  to  his  end,  although  primarily  made  for  money,  the  seller 
cannot  complain  if  the  illegal  consequence  is  attributed  to  him.  If 
the  buyer  knows  that  the  seller,  while  aware  of  his  intent,  is  indifferent 
to  it,  or  disapproves  of  it,  it  may  be  doubtful  whether  the  connection 
is  sufficient.  It  appears  to  us  not  unreasonable  to  say  that,  when 
the  illegal  intent  of  the  buyer  is  not  only  known  to  the  seller,  but 
encouraged  by  the  sale  as  just  explained,  the  sale  is  void.  The  accom- 
plice is  none  the  less  an  accomplice  because  he  is  paid  for  his  act. 


Chapter  II. 

OPERATION  AND  DISCHARGE  OF  CON- 
TRACTS. 

I. 

PARTIES  TO  CONTRACTS. 

Ordinarily  a  contract  does  not  impose  liability  or  confer  rights 
upon  persons  who  are  not  parties  to  it.  Some  courts,  however, 
hold  that  if  a  contract  is  made  for  the  benefit  of  a  third  person,  he 
may  sue  upon  it ;  while  all  allow  a  beneficiary  to  enforce  a  trust 
agreement,  and  all  permit  a  party  to  recover  money  properly 
belonging  to  him,  in  the  hands  of  another  who  has  received  it  in 
pursuance  of  a  contract  made  with  a  third  party.  A  person  not 
originally  a  party  to  a  contract  may  sue  upon  it  if  it  has  been 
assigned  to  him  by  act  of  one  of  the  parties  or  by  operation  of  law. 

Credits  in  money  or  goods  may  almost  universally  be  assigned, 
but  liability  upon  a  contract  cannot  be  assigned,  unless 

( 1 )  the  other  party  assents, 

(2)  the  contract  involves  work  requiring  no  personal  skill  or 
qualifications,  or 

(3)  the  contract  relates  to  an  interest  in  land  which  itself 
implies  certain  liabilities. 

No  form  of  assignment  is  necessary,  though  the  debtor  is  not 
bound  until  he  receives  notice.  As  between  assignor  and  assignee, 
the  rights  are  fixed  at  the  time  of  the  assignment.  There  is  a 
conflict  as  to  the  rights  of  successive  assignees,  when  the  last  gives 
notice  first.  Most  courts  hold  that  a  later  assignee  giving  notice 
to  the  debtor  first  is  entided  to  the  credit  assigned,  but  others  hold 
that  the  first  assignee  even  in  these  cases  is  entitled  to  the  property. 
If  the  debtor  has  paid  any  assignee  without  notice,  he  is  of  course 
under  no  liability  to  an  assignee  who  subsequently  notifies  him  of 
the  assignment.  All  assignees  take  subject  to  equities  against  their 
assignors,  and  are  therefore  said  to  stand  in  the  shoes  of  the 
assignor.  This  rule  does  not  apply  to  negotiable  instruments, 
which  are  governed  by  the  independent  principles  of  the  law  mer- 

176 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  1 7/ 

chant.  Certain  assignments  result  from  the  operation  of  law. 
An  assignment  of  an  interest  in  land  carries  with  it  rights  inci- 
dental to  the  transfer  of  the  property;  marriage  operates  to  vest 
rights  of  courtesy  or  dower  in  the  land  of  the  spouse ;  death 
transfers  property,  together  with  some  contractual  rights  and 
duties,  to  the  executor,  administrator,  or  heirs ;  and  bankruptcy 
vests  title  to  the  bankrupt's  estate  in  his  trustee. 

Parties  to  a  contract  may  contract  individually ;  jointly,  when 
several  persons  on  one  side  agree  to  do  a  thing  together ;  severally, 
when  they  agree  to  do  it  independently;  or  jointly  and  severally 
when  they  agree  to  do  it  both  together  and  independently.  In 
joint  contracts,  all  promisors  must,  as  a  general  rule,  be  sued 
together  though  each  is  liable  for  the  full  amount  of  the  debt. 
If  one  joint  promisor  dies,  actions  at  law  must  be  brought  against 
the  survivors,  although  in  equity  the  estate  of  the  deceased  joint 
promisor  may  be  joined.  If  one  joint,  or  joint  and  several,  prom- 
isor is  released,  the  effect  is  to  release  all.  When  joint  parties 
are  promisees,  they  are  entitled  to  performance  jointly,  not  sev- 
erally, and  in  the  case  of  death  of  one  of  thero,  the  rights  devolve 
upon  the  survivors.  In  order  to  bring  action  upon  the  contract, 
they  must  all  join  in  the  suit.  If  one  joint  debtor  pays  the  entire 
debt,  he  may  enforce  contribution  from  the  others  and  recover 
from  each  his  portion  of  the  debt.  When  the  contracts  are  sev- 
eral, the  parties  cannot  sue  or  be  sued  jointly.  Suit  must  be 
brought  by  or  against  each.  When  contracts  are  joint  and  sev- 
eral, suit  may  be  brought  by  or  against  all  jointly  or  by  or  against 
each  severally:  less  than  all  cannot  sue  or  be  sued  jointly  in  joint 
and  several  contracts. 


A.     Parties  Privy  to  Contract. 

I.    Necessity  of  Privity. 

Dunlop  Pneumatic  Tyre  Co.,  Ltd.    v.  Selfridge  &  Co.,  Ltd. 
L.  R.   (191 5)  A.  C.  '(Eng.)  847. 

The  Dunlop  Company,  Ltd.,  sues  Selfridge  &  Company,  Ltd., 
for  breach  of  an  agreement  not  to  cut  the  Dunlop  Company's  list 
prices.  The  agreement  in  question  was  entered  into  between 
Selfridge  &  Company,  Ltd.,  and  Dew  &  Company,  factors,  who 
had  a  contract  with  the  Dunlop  Company  to  procure  such  an  under- 
taking from  their  (Dew  &  Company's)  retail  customers.  This 
action  is  brought  by  the  Dunlop  Company  to  enforce  the  agree- 
ment between  Dew  &  Company  and  Selfridge  &  Company,  Ltd. 

Held,  that  the  plaintiffs  were  not  parties  to  the  contract  between 


17°  COMMERCIAL   LAW    CASES 

Dew  &  Company  and  Sel  fridge  &  Company,  Ltd.,  and  hence  cannot 
maintain  an  action  on  the  agreement. 

Viscount  Haldanc,  L.  C. 

In  the  law  of  England  certain  principles  are  fundamental.  One 
is  that  only  a  person  who  is  a  party  to  a  contract  can  sue  on  it.  A 
second  principle  is  that  if  a  person  with  whom  a  contract  not  under 
seal  has  been  made  is  to  be  able  to  enforce  it.  consideration  must  have 
been  given  by  him  to  the  promisor  or  to  some  other  person  at  the 
promisor's  request.  These  two  principles  are  not  recognized  in  the 
same  fashion  by  the  jurisprudence  of  certain  Continental  countries 
or  of  Scotland,  but  here  they  are  well  established. 

Lord  Dunedin:  ' 

I  confess  that  this  case  is  to  my  mind  apt  to  nip  any  budding 
affection  which  one  might  have  had  for  the  doctrine  of  consideration. 
For  the  effect  of  that  doctrine  in  the  present  case  is  to  make  it  possible 
for  a  person  to  snap  his  fingers  at  a  bargain  deliberately  made,  a 
bargain  not  in  itself  unfair,  and  which  the  person  seeking  to  enforce 
it  has  a  legitimate  interest  to  enforce.  Notwithstanding  these  con- 
siderations, I  cannot  say  that  I  have  ever  had  any  doubt  that  the 
judgment  of  the  Court  of  Appeal  was  right. 

"An  act  or  forbearance  of  one  party,  or  the  promise  thereof, 
is  the  price  for  which  the  promise  of  the  other  is  bought,  and  the 
promise  thus  given  for  value  is  enforceable." 

Now  the  agreement  sued  on  is  an  agreement  which  on  the  face 
of  it  is  an  agreement  between  Dew  and  Selfridge.  But  speaking  for 
myself,  I  should  have  no  difficulty  in  the  circumstances  of  this  case 
in  holding  it  proved  that  the  agreement  was  truly  made  by  Dew  as 
agent  for  Dunlop,  or  in  other  words  that  Dunlop  was  the  undisclosed 
principal,  and  as  such  can  sue  on  the  agreement.  None  the  less, 
in  order  to  enforce  it  he  must  show  consideration,  as  above  defined, 
moving  from  Dunlop  to  Selfridge. 

In  the  circumstances,  how  can  he  do  so?  The  agreement  in 
question  is  not  an  agreement  for  sale.  It  is  only  collateral  to  an 
agreement  for  sale ;  but  that  agreement  for  sale  is  an  agreement 
entirely  between  Dew  and  Selfridge.  The  tires,  the  property  in  which 
upon  the  bargain  is  transferred  to  Selfridge.  were  the  property  of 
Dew,  not  of  Dunlop,  for  Dew  under  his  agreement  with  Dunlop  held 
these  tires  as  proprietor,  and  not  as  agent.  What  then  did  Dunlop  do, 
or  forbear  to  do,  in  a  question  with  Selfridge?  The  answer  must  be, 
nothing.  He  did  not  do  anything,  for  Dew,  having  the  right  of 
projjcrty  in  tlie  tires,  could  give  a  good  title  to  any  one  he  liked, 
subject,  it  might  be,  to  an  action  of  damages  at  the  instance  of  Dunlop 
for  breach  of  contract.  He  did  not  forbear  in  anything,  for  he  had 
no  action  against  Dew  which  he  gave  up,  because  Dew  had  fulfilled 
his  contract  with  Dunlop  in  obtaining,  on  tlie  occasion  of  the  sale,  a 
contract   from  Selfridge  in  tlie  terms  prescribed. 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  1/9 

2.  Right  to  Recover  Money  Had  and  Received. 

Roberts  v.  Ely.    113  N.  Y.  128. 

Geiger  &  Company  bought  tea  of  Ely,  which  tea  was  then  in 
the  custody  of  the  Chicago  and  China  Tea  Company.  Geiger  & 
Company  made  an  agreement  with  the  China  Tea  Company  that 
the  tea  should  be  insured  for  their  benefit.  The  tea  was  subse- 
quently burned,  and  the  entire  insurance  money  paid  to  Ely,  who 
paid  no  portion  of  it  to  Geiger  &  Company.  The  plaintiff,  the 
assignee  of  Geiger  &  Company,  seeks  an  accounting  from  Ely  for 
this  money  so  paid  to  Ely's  firm. 

Held,  that  when  one  person  has  money  in  his  hands  properly 
belonging  to  another  person,  that  other  is  entitled  to  sue  without 
further  privity  of   contract. 

Andretvs,  J . 

Assuming  that  the  plaintiff  is  right  in  his  construction  of  the 
facts,  the  case  falls  within  the  familiar  doctrine  that  money  in  the 
hands  of  one  person,  to  which  another  is  equitably  entitled,  may  be 
recovered  in  a  common-law  action  by  the  equitable  owner  upon  an 
implied  promise  arising  from  the  duty  of  the  person  in  possession  to 
account  for  and  pay  over  the  same  to  the  person  beneficially  entitled. 
The  action  for  money  had  and  received  to  the  use  of  another  is  the 
form  in  which  courts  of  common  law  enforce  the  equitable  obligation. 
The  scope  of  this  remedy  has  been  gradually  extended  to  embrace 
many  cases  which  were  originally  cognizable  only  in  courts  of  equity. 
Whenever  one  person  has  in  his  possession  money  which  he  cannot 
conscientiously  retain  from  another,  the  latter  may  recover  it  in  this 
form  of  action,  subject  to  the  restriction  that  the  mode  of  trial  and 
the  relief  which  can  be  given  in  a  legal  action  are  adapted  to  the 
exigencies  of  the  particular  case,  and  that  the  transaction  is  capable 
of  adjustment  by  that  procedure,  without  prejudice  to  the  interests  of 
third  persons.  No  privity  of  contract  between  the  parties  is  required, 
except  that  which  results  from  the  circumstances.  The  right  on  the 
one  side,  and  the  correlative  duty  on  the  other,  create  the  necessary 
privity  and  justify  the  implication  of  a  promise  by  the  defendant  to 
do  that  which  justice  and  equity  require.  It  is  immaterial,  also, 
whether  the  original  possession  of  the  money  by  the  defendant  was 
rightful  or  wrongful.  It  is  sufficient  that  the  duty  exists  on  his  part, 
created  by  the  circumstances,  to  account  for  and  pay  it  over  to  the 
plaintiff. 

3.  See  Cases  under  Chapter  I,  III,  Consideration. 


l8o  COMMERCIAL    LAW    CASES 

B.     Assignment. 

I.    In  General. 

Atlantic  &  North  Carolina  Railroad  Co.  v.  Atlantic  and  North 
Carolina  Co.  14'/  N.  C.  ^68. 

Ives  agreed  to  cut  and  deliver  15,000  cords  of  wood  to  the 
plaintiff.  The  plaintiff  then  leased  its  property  to  the  Rowland 
Improvement  Company,  which  in  turn  assigned  to  the  North 
Carolina  Company.  The  North  Carolina  Company  refused  to  con- 
tinue the  contract  with  Ives.  Ives  recovered  judgment  against  the 
Railroad  Company,  which  now  sues  the  defendant,  the  North 
Carolina  Company,  for  its  expenses  in  that  suit  on  the  ground 
that  the  defendant  agreed  to  be  responsible  for  its  debts.  The 
defense  is  that  the  contract  with  Ives  was  not  assignable  and  there- 
fore would  not  pass  with  the  other  liabilities. 

Held,  that  a  contract  involving  no  personal  relation  or  con- 
fidence is  assignable,  both  as  to  credits  and  as  to  liabilities. 

Hoke,  J. 

While  at  common  law  the  rights  and  benefits  of  a  contract, 
except  in  the  case  of  the  law  merchant  and  in  cases  where  the  crown 
had  an  interest,  could  not  be  transferred  by  assignment,  the  rule  in 
its  strictness  was  soon  modified  in  practical  application  by  the  common 
law  courts  themselves  and  more  extensively  by  the  decisions  of  the 
courts  of  equity ;  and  the  principles  established  have  been  sanctioned 
and  extended  by  legislation  until  now  it  may  be  stated  as  a  general 
rule  that,  unless  expressly  prohibited  by  statute  or  in  contravention 
of  some  principle  of  public  policy,  all  ordinary  business  contracts  are 
assignable,  and  that  actions  for  breach  of  same  can  be  maintained  by 
the  assignee  in  his  own  name. 

The  following  criterion  is  universally  adopted :  All  things  in 
action  which  survive  and  pass  to  the  personal  representatives  of  a 
decedent  creditor  as  assets,  or  continue  as  liabilities  against  the  repre- 
sentatives of  a  decedent  debtor,  are  in  general  assignable ;  all  which 
do  not  thus  survive,  but  which  die  with  the  person  of  the  creditor  or 
of  the  debtor,  are  not  assignable.  The  first  of  these  classes,  according 
to  the  doctrine  prevailing  throughout  the  United  States,  includes  all 
claims  arising  from  contract,  express  or  implied,  with  certain  well- 
defined  exceptions;  and  those  arising  from  torts  to  real  or  personal 
property  and  from  frauds,  deceits  and  other  wrongs  whereby  an  estate, 
real  or  personal,  is  injured,  diminished  or  damaged.  The  second 
class  embraces  all  torts  to  the  person  or  character,  where  the  injury 
and  damage  arc  confined  to  the  body  and  the  feelings;  and  also  those 
contracts,  often  imi)lied,  the  breach  of  which  jjroduces  only  direct 
injury  and  damage,  bodily  or  mental,  to  the  person,  such  as  promises 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  151 

to  marry,  injuries  done  by  the  want  of  skill  of  a  medical  practitioner 
contrary  to  his  implied  undertaking,  and  the  like ;  and  also  those 
contracts,  so  long  as  they  are  executory,  which  stipulate  solely  for 
the  special  personal  services,  skill  or  knowledge  of  a  contracting  party. 

There  is  an  exception  to  the  effect  that  executory  contracts  for 
personal  services  involving  a  personal  relation  or  confidence  between 
the  parties  cannot  be  assigned.  And  another,  equally  well  established 
and  well-nigh  as  broad  as  the  rule  itself,  is  that  executory  contracts 
imposing  liabilities  or  duties  which  in  express  terms  or  by  fair  in- 
tendment from  the  nature  of  the  liabilities  themselves  import  reliance 
on  the  character,  skill,  business  standing  or  capacity  of  the  parties, 
cannot  be  assigned  by  one  without  the  assent  of  the  other. 

It  is  contended  that,  by  reason  of  those  exceptions  stated  in  the 
authorities  referred  to,  the  contract  before  us  was  not  assignable  so 
as  to  impose  liability  of  performance  on  defendant  lessee,  but  we 
think  the  position  is  not  well  taken.  In  the  first  place,  the  exception 
noted  arises  for  the  protection  of  the  other  party,  and  if  such  party 
assents,  as  he  did  in  this  instance,  the  restriction  no  longer  exists. 
But,  apart  from  this,  it  will  be  noted  that  the  exception  referred  to 
does  not  arise  or  apply  when  the  contract  is  entirely  objective  in  its 
nature,  and  gives  clear  indication  that  the  personality  of  the  other 
contracting  party  was  in  no  way  considered. 

The  contract  in  question  was  assignable.  It  was  an  ordinary 
business  contract  for  the  delivery  of  so  much  cord  wood  on  the  lessee's 
right  of  way,  not  requiring  or  importing  any  special  reliance  on  Ives' 
skill  or  business  qualifications.  It  could  be  performed  as  well  by  one 
man  as  another.  As  a  matter  of  fact,  there  is  testimony  to  the  effect 
that  it  was  to  be  done  in  this  instance  by  convicts  and  that  quarters 
had  already  been  constructed  for  their  protection  and  accommodation 
while  doing  the  work.  It  was  a  contract  of  employment  in  the  sense 
that  it  was  to  be  performed  by  means  of  personal  labor,  but  not  in 
the  sense  that  it  was  expected  or  intended  that  it  should  be  performed 
by  Ives.  Nor  did  the  credit  or  business  responsibility  of  the  original 
parties  affect  the  matter  one  way  or  the  other ;  not  that  of  Ives,  for 
the  wood  was  not  to  be  paid  for  till  it  was  delivered,  and  so  the 
defendant  assignee  was  fully  protected;  nor  that  of  the  assignor,  for 
unless  Ives  had  agreed  to  accept  the  defendant's  responsibility  in 
stead  and  place  of  the  assignor,  making  it  a  new  contract  by  way  of 
novation,  the  assignor  would,  notwithstanding  the  assignment,  still 
remain  liable. 

This,  ordinarily,  is  all  the  books  mean  when  they  state  the  propo- 
sition in  general  terms  that  a  contract  imposing  liability  cannot  be 
assigned;  that  the  assignment  of  such  a  contract  does  not,  as  a  rule, 
relieve  the  assignor  from  responsibility.  It  may  be  well  to  note  that 
we  are  speaking  of  the  assignment  of  the  contract  and  not  of  the 
transfer  of  the  property  about  which  parties  may  have  contracted. 
In  the  last  case  it  is  a  generally  accepted  doctrine  that,  in  the  absence 
of  an  agreement,  express  or  implied,  a  party  who  buys  property  from 
a  vendee  to  whom  the  owner  has  contracted  to  sell  it,  does  not,  as  a 


1^J  COMMFKCIAI.    LAW    CASKS 

rule,    ooino    under    personal    obligation    to    the    owner    to    pay    the 
purchase  price. 

2.     Assignment  of  Rights  Not  Yet  in  Existence. 

Taylor  r.  Barton  Chihi  Co.  -"sS  Mass.  ij6. 

The  Barton  Child  Coni^viny  assii:nied  its  hook  accounts  due 
and  which  should  become  duo  to  McCarthy,  who  in  turti  assigned 
to  the  plaintitf.  This  bill  is  brought  to  enforce  the  i^ledge  and 
trattsfer  of  the  book  accounts,  against  the  trustee  in  bankruptcy 
of  the  Barton  Child  Company. 

Held,  that  there  can  in  general  be  no  assignment  of  things 
not  yet  in  being. 

Rugg,  C.  J. 

The  crucial  question  is  whether  the  assig:nnient  of  book  accounts, 
which  are  to  come  into  existence  in  the  future  in  connection  with  an 
established  business,  will  be  enforced  in  equity  against  a  trustee  in 
bankruptcy. 

It  is  a  well  recognized  principle  of  the  common  law  that  a  man 
cannot  sell  or  mortgage  property-  which  he  does  not  possess  and  to 
which  he  has  no  title.  The  vendor  must  have  a  vested  right  in  per- 
sonal property  in  order  to  be  able  to  make  a  sale  of  it.  "A  man 
cannot  grant  or  charge  that  which  he  hath  not." 

There  can  be  no  present  conveyance  or  transfer  of  property  not 
in  existence,  or  of  property  not  in  the  possession  of  the  seller  to  which 
he  has  no  title.  A  sale  of  personal  chattels  is  not  good  against 
creditors  unless  there  has  been  a  deliver^-.  Manifestly  there  can  be 
no  deliven.-  of  chattels  not  in  existence.  In  order  that  after  acquired 
chattels  may  be  brought  under  the  lien  of  a  mortgage,  or  of 
hj-pothecation.  there  must  be  some  act  of  the  parties  subsequent  to  the 
time  when  such  chattels  come  into  existence  and  into  the  ownership 
and  possession  of  the  mortgagor.  The  mortgage  is  held  not  to  have 
the  etTect  of  changing  the  title  to  after  acquired  chattels  without 
some  further  act  of  the  parties. 

There  is  an  exception  at  the  common  law  to  the  effect  that  one 
may  sell  that  in  which  he  has  a  potential  title  although  not  present 
actual  possession.  The  present  owner  might  sell  the  wool  to  be 
grown  upon  his  flock,  the  crop  to  be  harvested  from  his  tield  or  the 
young  to  be  born  of  his  herd,  or  assign  the  wages  to  be  earned  under 
existing  employment.  That  principle  of  the  common  law  has  never 
been  carried  so  far  as  to  include  the  case  at  bar.  The  catch  of  fish 
expected  to  be  made  upon  a  voyage  about  to  begin  cannot  be  sold. 
There  can  be  no  sale  of  the  wool  of  the  sheep,  the  crop  of  a  field, 
or  the  increase  of  herds  not  owned  but  to  be  bought,  and  there  can 
be  no  assignment  of  wages  to  be  earned  under  a  contract  of  employ- 
ment to  be  made  in  the  future. 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  1 83 

It  is  also  the  established  doctrine  in  this  Commonwealth  that  a 
mortgage  of  future  acquired  property  will  not  be  enforced  in  equity 
before  actual  possession  taken  by  the  mortgagee  as  against  persons 
subsequently  acquiring  an  interest  therein  for  value  and  having 
possession.  That  has  long  been  settled  here,  although  the  contrary 
rule  prevails  more  widely.  It  would  be  anomalous  for  a  court 
governed  by  these  principles  as  to  sales  and  mortgages  of  future 
acquired  goods  and  chattels  to  hold  that  there  could  be  an  assignment 
of  future  acquired  book  accounts  valid  and  enforceable  under  circum- 
stances where  a  like  attempt  to  hypothecate  future  acquired  chattels 
would  be  held  unenforceable. 

Practical  difficulties  of  no  small  consequence  would  be  encountered 
in  the  operation  of  the  contrary  doctrine.  Assignments  of  book 
accounts  do  not  require  recording  or  any  public  act  for  their  validity. 
Notice  need  not  be  given  in  order  that  they  be  valid  against  third 
persons.  Merchants  and  manufacturers  well  might  acquire  a  con- 
siderable credit  upon  the  supposed  strength  of  book  accounts  which 
later  might  turn  out  to  have  been  assigned  long  before  they  came 
into  existence.  A  door  would  be  opened  for  the  accomplishment  of 
fraud  in  business. 

There  are  decisions  by  the  courts  of  other  jurisdictions  where 
a  contrary  result  has  been  reached. 

The  principles  and  spirit  of  our  jurisprudence  have  been  that 
owners  of  personal  propert>'  ought  not  to  acquire  any  false  credit  by 
creating  incumbrances  more  or  less  secret  and  unknown  to  the  world 
upon  property  of  which  they  are  to  come  into  possession  in  the  future 
as  ostensible  owners  in  absolute  right. 

In  the  light  of  these  decisions  it  would  be  illogical  and  discordant 
with  the  policy  of  our  law  to  uphold  the  assignment  in  the  case  at  bar. 

3.     Assignment  of  Future  Wages. 

Rodijkeit  v.  Andrews.    7^  Oh.  St.  104. 

Rodijkeit  assigned  his  wages  to  become  due  from  the  L.  S.  & 
M.  S.  Railroad  to  Andrews  for  a  valuable  consideration.  Rodij- 
keit now  sues  the  railroad  for  his  wages,  in  spite  of  the  previous 
assignment. 

Held,  that  an  assignment  of  future  wages  is  valid  if  they  are 
to  be  earned  under  an  existing  employment. 

Summers,  J. 

The  question  presented  is  the  right  of  a  person  in  the  employ 
of  another,  in  the  absence  of  a  contract  for  a  definite  time  of  employ- 
ment, to  assign  future  earnings  from  such  employment. 

It  is  well  settled  that  a  mere  expectancy  or  possibility  is  not 
assignable  at  law-;  consequently  wages  to  be  earned  in  the  future, 
not  under  an  existing  engagement  but  under  engagements  subsequently 


184  COMMERCIAL    LAW    CASES 

to  be  made,  are  not  assignable.  If  there  is  an  existing  employment, 
under  which  it  may  reasonably  be  expected  that  the  wages  assigned 
will  be  earned,  then  the  possibility  is  coupled  with  an  interest  and  the 
wages  may  be  assigned. 

Some' of  the  early  cases  were  to  the  effect  that  the  engagement 
must  be  for  a  time  covering  the  wages  assigned.  And  later  cases 
held  that  the  assignment  was  valid  although  the  engagement  was 
subject  to  be  terminated  at  any  time. 

But  in  Kane  v.  Clough,  36  Mich.  436,  Cooley,  C.  J.,  states  that 
he  is  unable  to  distinguish  a  case  of  existing  employment  merely, 
where  there  is  no  contract  for  a  definite  time,  but  only  an  employment, 
and  an  expectation  of  continuous  work,  from  a  case  of  an  existing 
contract  for  a  fixed  time  but  subject  to  the  right  to  discharge  at  will, 
and,  accordingly,  it  is  there  ruled  that  an  assignment  of  wages  to  be 
earned  in  the  future  under  an  existing  employment  is  valid. 

"An  assignment  of  his  wages  by  a  laborer,  executed  when  he  is 
not  engaged  in,  and  not  under  contract  for,  the  employment  in  which 
the  wages  are  to  be  earned,  is  too  vague  and  uncertain  to  be  sustained 
as  a  valid  assignment  and  transfer  of  property."  But  "an  assignment 
of  wages  expected  to  be  earned  in  the  future  in  a  specified  employ- 
ment, though  not  under  an  existing  employment  or  contract,  is  valid 
in  equity."  The  reason  such  an  assignment  is  not  good  at  law  but 
may  be  in  equity  is  tersely  stated  thus :  "To  make  a  grant  or  assign- 
ment valid  at  law,  the  thing  which  is  the  subject  of  it  must  have  an 
existence,  actual  or  potential,  at  the  time  of  such  grant  or  assignment. 
But  courts  of  equity  support  assignments  of  contingent  interests  and 
expectations,  and  also  of  things  which  have  no  present  actual  or 
potential  existence,  but  rest  in  mere  possibility  only." 

4.     Assignment  of  Contract  Involving  Personal  Credit. 

Arkansas  Valley  Smelting  Co.  v.  Belden  Mining  Co.  I2y  U.  S. 
379- 

The  Belden  Mining  Company  made  a  contract  in  writing  with 
Billing  and  Eilers  to  deliver  lead  ore  to  Billing  and  Eilers,  pay- 
ment to  be  made  in  accordance  with  an  assay  to  be  taken.  The 
firm  of  Billing  &  Eilers  was  dissolved  and  the  contract  assigned 
to  Billing  who  in  turn  assigned  the  contract  to  the  Arkansas 
Valley  Smelting  Company,  the  plaintiff.  The  Belden  Company 
thereupon  refused  to  perform  the  contract. 

Held,  that  when  a  contract  involves  personal  credit,  it  is  not 
assignable. 

Gray,  J. 

At  the  present  day,  no  doubt,  an  agreement  to  pay  money,  or  to 
deliver  goods,  may  be  assigned  by  the  person  to  whom  the  money  is 
to  be  paid  or  the  goods  are  to  be  delivered,  if  there  is  nothing  in  the 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  185 

terms  of  the  contract,  whether  by  requiring  something  to  be  after- 
wards done  by  him,  or  by  some  other  stipulation,  which  manifests 
the  intention  of  the  parties  that  it  shall  not  be  assignable. 

But  every  one  has  a  right  to  select  and  determine  with  whom  he 
will  contract,  and  cannot  have  another  person  thrust  upon  him  without 
his  consent.  In  the  familiar  phrase  of  Lord  Denman,  "You  have  the 
right  to  the  benefit  you  anticipate  from  the  character,  credit  and 
substance  of  the  party  with  whom  you  contract."  The  rule  upon 
this  subject,  as  applicable  to  the  case  at  bar,  is  well  expressed  in  a 
recent  English  treatise.  "Rights  arising. out  of  contract  cannot  be 
transferred  if  they  are  coupled  with  liabilities,  or  if  they  involve  a 
relation  of  personal  confidence  such  that  the  party  whose  agreement 
conferred  those  rights  must  have  intended  them  to  be  exercised  only 
by  him  in  whom  he  actually  confided." 

The  contract  here  sued  on  was  one  by  which  the  defendant 
agreed  to  deliver  ten  thousand  tons  of  lead  ore  from  its  mines  to 
Billing  and  Eilers  at  their  smelting  works.  The  price  was  not  fixed 
by  the  contract,  or  payable  upon  the  delivery  of  the  ore.  During  the 
time  that  must  elapse  between  the  delivery  of  the  ore,  and  the  ascer- 
tainment and  payment  of  the  price,  the  defendant  had  no  security 
for  its  payment  except  in  the  character  and  solvency  of  Billing  and 
Eilers.  The  defendant,  therefore,  could  not  be  compelled  to  accept 
the  liability  of  any  other  person  or  corporation  as  a  substitute  for 
the  liability  of  those  with  whom  it  had  contracted. 

The  cases  tending  to  support  this  action  are  distinguishable  from 
the  case  at  bar,  and  the  principal  ones  may  be  classified  as  follows : 

First.  Cases  of  agreements  to  sell  and  deliver  goods  for  a  fixed 
price,  payable  in  cash  on  delivery,  in  which  the  owner  would  receive 
the  price  at  the  time  of  parting  with  his  property.  Nothing  further 
would  remain  to  be  done  by  the  purchaser,  and  the  rights  of  the 
seller  could  not  be  affected  by  the  question  whether  the  price  was 
paid  by  the  person  with  whom  he  originally  contracted  or  by  an 
assignee. 

Second.  Cases  upon  the  question  how  far  executors  succeed  to 
rights  and  liabilities  under  a  contract  of  their  testator.  Assignment 
by  operation  of  law,  as  in  the  case  of  an  executor,  is  quite  different 
from  assignment  by  act  of  the  party ;  and  the  one  might  be  held  to 
have  been  in  the  contemplation  of  the  parties  to  this  contract  although 
the  other  was  not.  A  lease,  for  instance,  even  if  containing  an 
express  covenant  against  assignment  by  the  lessee,  passes  to  his 
executor.  And  it  is  by  no  means  clear  that  an  executor  would  be 
bound  to  perform,  or  would  be  entitled  to  the  benefit  of,  such  a  con- 
tract as  that  now  in  question. 

Third.  Cases  of  assignments  by  contractors  for  public  works, 
in  which  the  contracts,  and  the  statutes  under  which  they  were  made, 
were  held  to  permit  all  persons  to  bid  for  the  contracts,  and  to  execute 
them  through  third  persons. 

Fourth.  Other  cases  of  contracts  assigned  by  the  party  who  was 
to  do  certain  work,  not  by  the  party  who  was  to  pay  for  it,  and  in 


l86  COMMERCIAL    LAW    CASES 

which  the  question  was  whether  the  work  was  of  such  a  nature  that 
it  was  intended  to  be  performed  by  the  original  contractor  only, 

5.     Assignment  of  Part  of  Debt  Due. 

James  v.  City  of  Neivton.     142  Mass.  j66. 

Stewart  entered  into  a  written  contract  with  the  city  of  Newton 
to  build  a  school  house.  He  made  an  assignment  to  the  plaintiff 
of  $600  of  the  money  to  become  due  to  him  from  the  city,  to  be 
paid  out  of  the  money  reserved  by  the  city  on  the  guaranty  of  per- 
formance. Gilkey  was  appointed  assignee  in  insolvency  of  Stew- 
art's property,  and  the  question  now  arises  whether  the  assignment 
of  part  of  the  amount  due  is  valid. 

Held,  that  in  equity  an  assignment  of  part  of  a  credit  may  be 
made  although  the  rule  is  different  at  law. 

Field,  J. 

Courts  of  law  originally  refused  to  recognize  any  assignments 
of  choses  in  action  made  without  the  assent  of  the  debtor,  but  for  a 
long  time  they  have  recognized  and  enforced  assignments  of  the 
whole  of  a  debt,  by  permitting  the  assignee  to  sue  in  the  name  of 
the  assignor  under  an  implied  power  which  they  hold  to  be  irre- 
vocable. Partial  assignments  such  courts  have  never  recognized, 
because  they  hold  that  an  entire  debt  cannot  be  divided  into  parts  by 
the  creditor  without  the  consent  of  the  debtor.  It  is  not  wholly  a 
question  of  procedure,  although  the  common  law  procedure  is  not 
adapted  to  determining  the  rights  of  different  claimants  to  parts  of 
a  fund  or  debt.  The  rule  has  been  established,  partially  at  least,  on 
the  ground  of  the  entirety  of  the  contract,  because  it  is  held  that  a 
creditor  cannot  sue  his  debtor  for  a  part  of  an  entire  debt,  and,  if 
he  brings  such  an  action  and  recovers  judgment,  the  judgment  is  a 
bar  to  an  action  to  recover  the  remaiiiing  part.  There  must  be  dis- 
tinct promises  in  order  to  maintain  more  than  one  action. 

It  is  said  that,  in  equity,  there  may  be,  without  the  consent  of 
the  debtor,  an  assignment  of  a  part  of  an  entire  debt.  It  is  conceded 
that,  as  between  assignor  and  assignee,  there  may  be  such  an  assign- 
ment. 

In  many  jurisdictions,  courts  of  equity  have  gone  further,  and 
have  held  that  an  assignment  of  a  part  of  a  fund  or  debt  may  be 
enforced  in  equity  by  a  bill  brought  by  the  assignee  against  the  debtor 
and  assignor  while  the  debt  remains  unpaid.  The  procedure  in  equity 
is  adai)ted  to  determining  and  enforcing  all  the  rights  of  the  parties, 
and  the  debtor  can  ]iay  the  fund  or  debt  into  court,  have  his  costs 
if  he  is  entitled  to  them,  and  thus  be  compensated  for  any  expense 
or  trouble  to  which  he  may  have  been  jnit  by  the  assignment.  But 
some  courts  of  equity  have  gone  still  further,  and  have  held  that 
after  notice  of  a  i)artial  assignment  of  a  debt,  the  debtor  cannot 
rightfully  pay  the  sum  assigned  to  his  creditor,  and,  if  he  docs,  that 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  iS/ 

this  is  no  defense  to  a  bill  by  the  assignee.  The  doctrine  carried  to 
this  extent  effects  a  substantial  change  in  the  law.  Under  the  old 
rule,  the  debtor  could  with  safety  settle  with  his  creditor  and  pay  him, 
unless  he  had  notice  or  knowledge  of  an  assignment  of  the  whole  of 
the  debt;  under  this  rule,  he  cannot,  if  he  have  notice  or  knowledge 
of  an  assignment  of   any   part  of   it. 

6.  Form  of  Assignment. 

Moore  v.  Loivrey.  2^  la.   ?jd. 

Miles  &  Keeler  owed  money  to  Fowler  &  Munson.  They 
requested  Lowrey  to  pay  a  balance  due  them  to  Fowler  &  Mim- 
son,  or  order,  intending  thereby  to  transfer  and  assign  the  claim 
against  Lowrey  to  Fowler  and  Munson.  The  plaintiff,  a  creditor 
of  Miles  &  Keeler,  seeks  to  have  this  assignment  set  aside  on 
the  ground  that  its  form  was  improper. 

Held,  that  no  particular  form  is  necessary  to  constitute  an 
assignment. 

Beck,  J. 

No  particular  form  is  necessary  to  constitute  an  assignment  of 
a  debt.  If  the  intent  of  the  parties  to  effect  an  assignment  be  clearly 
established,  that  is  sufficient.  Neither  is  it  necessary  that  the  assign- 
ment be  in  writing.  If  in  writing,  it  may  be  in  the  form  of  an  agree- 
ment, an  order,  or  of  any  other  instrument  which  the  parties  may 
use  for  that  purpose.  Neither  is  it  necessary  that  the  intent  and  the 
contract  of  the  parties  fully  appear  in  the  writing,  but  they  may  be 
otherwise   shown. 

It  is  objected,  that  the  order  is  negotiable,  and  was  not  taken  by 
the  intervenors  in  payment  pro  tanto  of  their  claims  upon  Miles  & 
Keeler.  These  facts  may  be  admitted,  yet  it  does  not  follow  that  the 
assignment  is  thereby  defeated.  If  the  assignment  of  the  debt  was 
made  in  good  faith,  and  the  order  given  for  the  purpose  of  effectuat- 
ing its  collection,  the  negotiability  of  the  order  certainly  could  not 
defeat  the  assignment. 

7.  Rights  of  Assignee  after  Notice  to  Debtor. 

Brice  v.  Bannister.    L.  R.  j  Q.B.D.  (Eng.)  ^6p. 

Gough,  who  had  agreed  to  build  a  ship  for  Bannister,  assigned 
iioo  of  the  money  to  become  due,  to  Brice.  Brice  gave  notice  of 
the  assignment  to  Bannister.  Subsequently  Bannister  paid  Gough 
all  the  money  due  under  the  contract.  Brice  sties  for  the  amount 
assigned  to  him. 

Held,  that  after  notice  of  assignment,  the  rights  of  the  as- 
signee cannot  be  divested  by  the  assignor  and  debtor. 


l88  COMMERCIAL   LAW    CASES 

Cotton,  L.  J. 

It  was  urged  that  the  assignee  of  a  chose  in  action  takes  subject 
to  all  equities.  But  these  must  be  equities  existing  or  arising  out  of 
circumstances  existing  before  notice  is  given  of  the  assignment;  the 
advances  made  by  the  defendant  were  in  no  way  sanctioned  by  the 
contract,  and  in  no  sense  an  equity  between  Gough  and  the  defendant 
existing  or  arising  from  circumstances  existing  at  the  date  of  the 
notice  to  the  defendant  of  the  assignment  to  the  plaintiff.  The 
plaintiff  was  assignee  for  value  of  the  moneys  payable  under  the 
contract,  without  any  deduction  for  cost  of  materials  or  other  costs 
of  construction.  The  defendant,  for  his  own  purposes,  determined 
not  to  complete  the  ship  himself,  but  to  let  Gough  do  so  under  the 
contract.  To  enable  him  to  do  so,  he,  after  notice  of  the  assignment 
to  the  plaintiff,  paid  money  to  Gough  so  as  to  exhaust  the  contract 
price.  By  so  doing,  he  could  not,  in  my  opinion,  defeat  or  prejudice 
the  plaintiff's  right. 

Brannvell,  L.  J, 

If  Gough  had  broken  his  engagement,  or  threatened  to  break 
his  engagement  to  finish  the  vessel,  or  to  finish  it  in  a  reasonable 
time,  and  the  defendant  to  remedy  and  avert  such  breach,  reasonably 
and  bona  fide,  not  to  defeat  the  plaintiff  but  to  protect  himself, 
advanced  money  to  Gough  before  it  was  done,  so  that  it  never 
became  due  according  to  the  contract,  I  should  have  hesitated  long 
before  holding  that  the  defendant  was  liable  in  this  action.  But  the 
defendant's  advancing  of  the  money  as  he  did  was  quite  voluntary 
and  in  no  sense  compulsory. 

8.     Assignee  Takes  Subject  to  Equities  against  Assignor. 

The  Goshen  National  Bank  v.  Bingham.    ii8  N.  Y.  ^49. 

Brown  fraudulently  secured  the  certification  by  the  Goshen 
Bank  of  his  personal  check,  and  in  exchange  for  this  check,  which 
he  neglected  to  indorse,  procured  a  check  from  Bingham  &  Co. 
which  he  cashed.  He  then  left  for  Canada.  Bingham  &  Co.  subse- 
quently got  from  Brown  a  power  of  attorney  to  indorse  the  certi- 
fied check  which  they  had  received  from  him,  and  sue  to  recover 
the  amount  from  the  bank. 

Held,  that  the  transfer  of  an  unindorsed  negotiable  instrument 
is  like  any  other  assignment ;  the  assignee  is  bound  by  equities 
against  the  assignor. 

Parker,  J . 

As  against  Brown,  to  whose  order  the  check  was  payable,  the 
bank  had  a  good  defense.  But  it  could  not  defeat  a  recovery  by  a 
bona  fide  holder  to  whom  the  check  had  been  indorsed  for  value.     By 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  1 89 

an  oversight  on  the  part  of  both  Brown  and  Bingham  &  Co.,  the 
check  was  accepted  and  cashed  without  the  indorsement  of  the  payee. 
Before  the  authority  to  indorse  the  name  of  the  payee  upon  the 
check  was  procured  and  its  subsequent  indorsement  thereon,  Bingham 
&  Co.  had  notice  of  the  fraud  which  constituted  a  defense  for  the 
bank  as  against  Brown. 

It  is  too  well  settled  by  authority,  both  in  England  and  in  this 
country,  to  permit  of  questioning,  that  the  purchaser  of  a  draft,  or 
check,  who  obtains  title  without  an  indorsement  by  the  payee,  holds 
it  subject  to  all  equities  and  defenses  existing  between  tlie  original 
parties,  even  though  he  has  paid  full  consideration,  without  notice 
of  the  existence  of  such  equities  and  defenses. 

The  general  rule  is  that  no  one  can  transfer  a  better  title  than 
he  possesses.  An  exception  arises  out  of  the  rule  of  the  law 
merchant,  as  to  negotiable  instruments.  It  is  founded  on  the  com- 
mercial policy  of  sustaining  the  credit  of  commercial  paper.  Being 
treated  as  currency  in  commercial  transactions,  such  instruments  are 
subject  to  the  same  rule  as  money.  If  transferred  by  indorsement, 
for  value,  in  good  faith  and  before  maturity,  they  become  available 
in  the  hands  of  the  holder,  notwithstanding  the  existence  of  equities 
and  defenses  which  would  have  rendered  them  unavailable  in  the 
hands  of  a  prior  holder. 

This  rule  is  only  applicable  to  negotiable  instruments  which  are 
negotiated  according  to  the  law  merchant. 

When,  as  in  this  case,  such  an  instrument  is  transferred  but 
without  an  indorsement,  it  is  treated  as  a  chose  in  action  assigned 
to  the  purchaser.  The  assignee  acquires  all  the  title  of  the  assignor 
and  may  maintain  an  action  thereon  in  his  own  name.  And  like  other 
choses  in  action  it  is  subject  to  all  the  equities  and  defenses  existing 
in  favor  of  the  maker  or  acceptor  against  the  previous  holder. 

Prior  to  the  indorsement  of  this  check,  therefore,  Bingham  &  Co. 
were  subject  to  the  defense  existing  in  favor  of  the  bank  as  against 
Brown,  the  payee. 

It  would  seem,  therefore,  that  having  taken  title  by  assignment, 
for  such  was  the  legal  effect  of  the  transaction,  by  reason  of  which 
the  defense  of  the  bank  against  Brown  became  effectual  as  a  defense 
against  a  recovery  on  the  check  in  the  hands  of  the  plaintiffs  as  well, 
];rown  and  Bingham  &  Co.  could  not,  by  any  subsequent  agree- 
ment or  act,  so  change  the  legal  character  of  the  transfer  as  to  affect 
the  equities  and  rights  which  had  accrued  to  the  bank.  The  subse- 
quent act  of  indorsement  could  not  relate  back  so  as  to  destroy  the 
intervening  rights  and  remedies  of  a  third  party. 

9.    Rights  of  Successive  Assignees. 

Phillips's  Estate.  No.  5.  205  Pa.  515. 

Moses   assigned    his    interest    in   the    Phillips   estate    to    four 
persons  for  varied  amounts,  the  aggregate  of  which  exceeded  his 


IQO  COMMERCIAL    LAW    CASES 

interest.  The  Life  Insurance  Company,  one  of  the  assignees, 
claims  priority  over  other  assignees,  although  third  in  point  of 
date,  because  it  first  gave  notice  of  the  assignment. 

Held,  that  in   Pennsylvania,  as  between  successive  assignees 
the  one  first  giving  notice  is  entitled  to  the  property  assigned. 

How  far,  as  between  successive  assignees  of  a  fund  in  the  hands 
of  a  third  person,  notice  of  the  assignment  to  such  person  is  necessary 
to  complete  the  title  of  the  assignee  as  against  a  subsequent  assignee 
having  no  actual  knowledge  of  the  prior  assignment,  who  gives  such 
notice,  does  not  appear  to  have  been  decided  in  Pennsylvania,  though 
it  has  been  held  that  an  assignment  is  good  without  notice,  as  against 
a  subsequent  attachment.  But  an  attaching  creditor  stands  precisely 
in  the  position  of  the  assignor,  with  only  such  rights  as  he  has  against 
his  assignee ;  while  the  rights  of  a  subsequent  purchaser  for  value 
depend  upon  entirely  different  considerations.  In  England  and  in 
many  of  the  states  of  the  union  it  is  perfectly  well  settled  that  the 
title  of  an  assignee  does  not  become  complete  until  he  has  given  notice, 
and  the  rule  is  that  the  assignees  have  priority  according  to  the 
priority  of  notice.  A  different  doctrine,  it  appears,  however,  is  held 
in  some  of  the  states,  where,  between  different  assignees  of  a  chose 
in  action,  he  who  is  first  in  time  is  first  in  right,  notwithstanding 
he  has  given  no  notice  to  the  debtor  or  the  subsequent  assignee, 
though  the  debtor  will  be  protected  if  he  has  made  payment  to  the 
assignor  or  to  the  second  assignee  before  notice  of  the  prior  assign- 
ment. 

'"The  American  decisions  upon  this  subject  cannot  be  reconciled. 
In  England  and  in  some  of  the  states  the  rule  giving  to  the  assignee 
who  first  notifies  the  debtor  party  or  trustee  a  precedence  over  all 
others,  even  those  who  are  earlier  in  date,  furnishes  a  certain  and 
simple  criterion  for  determining  the  priority,  it  being  remembered 
that  this  rule  is  confined  to  pure  personal  things  in  action,  and  does 
not  extend  to  liens  and  other  equitable  interests  in  real  estate.  In 
the  states  where  the  rule  referred  to  does  not  prevail,  the  question 
must  turn  upon  other  doctrines.  If  the  interests  are  equitable  in  their 
nature,  and  the  equity  of  the  assignee  is  intrinsically  superior  to  the 
others,  the  settled  principles  of  equity  should  control,  that  the  order 
of  time  determines  the  order  of  priority ;  or  in  other  words,  that  the 
subsequent  assignee  takes  subject  to  the  rights  of  the  one  prior  in 
time;  and  this  principle  has  been  applied  in  such  cases  by  many  able 
decisions.  On  the  other  hand,  if  the  subsequent  assignee  has  acquired 
the  legal  title,  and  was  a  purchaser  for  a  valuable  consideration  and 
without  notice,  he  is  protected,  and  this  doctrine  of  bona  fide  purchase 
seems  to  have  been  extended,  by  some  decisions,  to  subsequent  as- 
signees who  had  only  obtained  an  equitable  interest." 

The  analogies  with  regard  to  sales  of  personal  property  in  pos- 
session are  certainly  in  favor  of  the  view  taken  in  tlie  decisions  last 
referred  to,  the  vendee,  in  such  case,  being  required,  for  the  protection 
of  subsequent  purchasers,  to  take  possession  to  the  exclusion  of  the 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  IQI 

vendor  where  the  property  is  capable  of  actual  possession,  or  by 
assuming  such  open  ownership  as  the  case  admits  of,  where  it  is  not. 
Why  should  a  different  rule  apply  to  purchases  of  choses  in  action? 
Why  should  the  purchaser  not  be  required  to  do  all  that  lies  in  his 
power  to  make  it  impossible  for  the  assignor  to  commit  a  fraud  or  to 
do  an  injury  to  subsequent  purchasers,  relying  on  his  integrity  and 
having  no  means  of  knowing  that  he  has  ceased  to  be  the  owner 
except  by  inquiry  of  the  person  in  whose  hands  the  fund  is?  The 
failure  to  give  notice  to  such  person  puts  it  in  the  power  of  the 
assignor  to  do  this  wrong,  and  the  consequences  of  the  failure  ought, 
therefore,  to  be  upon  him  who  commits  it. 

(The  foregoing  excerpt  is  taken  from  the  opinion  of  the  District 
Court,  whose  judgment  was  affirmed  on  appeal.) 

10.     Assignment  by  Death. 

Billings's  Appeal.  io6  Pa.  558. 

Billings  made  a  written  contract  with  Colton  whereby  Colton 
was  to  cut  pine  timber  from  land  of  Billings.  Colton  then  con- 
tracted with  Putnam  that  Putnam  should  do  part  of  the  work. 
Billings  and  Colton  both  died  and  the  question  is  raised  in  the 
administration  of  the  Billings  estate  whether  the  contract  in  ref- 
erence to  the  cutting  of  the  timber  was  thereby  terminated. 

Held,  that  a  contract  which  does  not  involve  personal  service 
may  be  enforced  by  or  against  an  executor  or  administrator. 

Clark,  J. 

The  plaintiffs  maintain  that  the  contract  under  which  the  de- 
fendants assume  to  act  is  personal  in  its  character;  that  it  provides 
for  the  performance  of  such  services,  and  the  exercise  of  such  per- 
sonal skill  and  experience  upon  the  part  of  Colton,  in  the  matters 
involved,  as  necessarily  limited  its  performance  to  Colton  himself; 
and,  further,  that  the  contract  is  such  that  at  the  death  of  Billings, 
its  continuance  devolved  such  duties  and  created  such  obligations 
upon  his  legal  representatives  as  are  inconsistent  with  the  settlement 
of  his  estate ;  that,  therefore,  the  survival  of  the  contract  was  neces- 
sarily not  in  contemplation  of  the  parties  at  the  time  of  its  execution. 
It  is  urged,  therefore,  that  upon  the  death  of  either  party,  the  obliga- 
tion of  the  contract  ceased  as  to  both. 

It  is  certainly  true  that  the  rights  and  responsibilities  of  executors 
and  administrators  depend,  in  many  cases,  upon  the  relations  of  the 
original  parties ;  the  former  do  not,  in  all  cases,  succeed  to  the  con- 
tracts of  the  latter;  what  may  be  termed  mere  contract,  personal 
relations  do  not  survive.  Where  the  agreement  is  for  services  which 
involve  the  peculiar  skill  of  an  expert,  by  whom  alone  the  particular 
work  in  contemplation  of  the  parties  can  be  performed,  or  more 
generally,  where  distinctly  personal  considerations  are  at  the  founda- 


192  COMMERCIAL    LAW    CASES 

tion  of  the  contract,  the  relation  of  the  parties  is  dissolved  by  the 
death  of  him  whose  personal  quaHties  constituted  the  particular 
inducement  to  the  contract.  The  casus  must  be  such,  however,  as  to 
wholly  prevent  the  performance  of  the  contract;  what  is  impossible 
to  be  done  cannot  be  required  to  be  done,  and  a  subsequent  interven- 
ing incapacity  will,  in  such  case,  work  a  dissolution  of  the  contract. 

But  where  a  party  agrees  to  do  that  which  does  not  necessarily 
require  him  to  perform  in  person  (that  which  he  may,  by  assignment 
of  his  contract  or  otherwise,  employ  others  to  do),  we  may  fairly 
infer,  unless  otherwise  expressed,  that  a  mere  personal  relation  was 
not  contemplated.  It  is  true,  also,  perhaps,  that  a  contract  may  involve 
matters  of  such  a  nature  as  to  render  the  performance  of  them  so 
incompatible  with  the  settlement  of  a  decedent's  estate,  and  so  incon- 
sistent with  the  general  duties  of  an  administrator  or  executor  that, 
in  the  absence  of  any  express  provision  to  the  contrary,  the  parties 
may  be  presumed  to  have  intended  its  dissolution  at  death.  The  whole 
question  in  each  case  is  one  for  construction,  and  depends  upon  the 
intention  of  the  parties,  that  intention  to  be  found  under  the  rules 
regulating  the  construction  of  contracts  in  general.  Resorting  in 
the  first  instance  to  the  instrument  itself,  we  find  there  an  express 
provision  that  for  the  faithful  performance  of  each  and  every  the 
covenants  and  agreements  aforesaid,  each  of  said  parties  doth  bind 
himself,  his  heirs,  executors  and  administrators,  to  the  other,  his  heirs, 
executors  and  administrators,   firmly  by  these  presents. 

We  discover  nothing  in  the  nature  of  the  obligation  assumed, 
or  of  the  duties  to  be  performed  on  either  side  that  would  tend  to 
create  any  merely  personal  relation  between  the  parties,  or  involve 
such  a  performance  as  would  indicate  that  a  survival  of  the  contract 
was  not  in  contemplation;  a  contrary  intention,  however,  is  distinctly 
shown  by  the  subsequent  conduct  of  the  parties. 

II.     Assignment  by  Bankruptcy. 

In  re  Wright,  i^j  Fed.  ^44. 

Wright,  a  bankrupt,  was  entitled  to  commissions  upon  renewal 
premiums  on  insurance  policies.  A  creditor  applied  for  an  order 
to  have  this  interest  assigned  to  the  trustee  in  bankruptcy. 

Held,  that  under  the  bankruptcy  act,  this  was  property  of  the 
bankrupt  which  he  might  have  transferred  and  which,  therefore, 
passes  to  his  trustee. 

Noyes,  Cir.  J . 

Section  70  of  the  bankrupt  act  (Act  July  i,  1898,  c.  541)  provides 
that  the  trustee  shall  be  vested  with  "the  title  of  the  bankrupt,  as  of 
the  date  he  was  adjudged  a  bankrupt,  except  so  far  as  it  is  property 
whicli  is  exempt." 

It  may  be  conceded  tliat  this  contract  as  a  whole  is  based  upon 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  I93 

personal  trust  and  confidence,  and  is  not  assignable.  But  there  is  a 
difference  between  an  absolute  assignment  of  a  contract  and  an  assign- 
ment of  rights  under  a  contract.  The  personal  confidence  which 
precludes  the  transfer  of  rights  arising  out  of  a  contract  must  be 
involved  in  the  nature  of  the  rights  themselves.  It  is  not  ordinarily- 
involved  in  the  right  to  receive  moneys  due  or  to  grow  due  under  a 
contract,  and  this  right  is  generally  assignable  without  the  consent  of 
the  other  party.  The  right  to  receive  the  renewal  commissions  under 
the  present  contract,  which  is  the  right  involved  in  the  question  certi- 
fied, seems  not  to  involve  personal  confidence.  The  contracts  of 
insurance  have  already  been  obtained.  The  collection  of  renewal 
premiums  is  largely  a  ministerial  act.  It  is  possible  that,  if  the 
interests  under  the  contract  are  transferred  to  the  trustee,  the  insur- 
ance company  may  defeat  the  object  of  the  transfer  by  withholding 
its  consent.  But  the  fact  that  the  interest  is  defeasible  does  not 
prevent  its  transfer.  Defeasible  and  contingent  interests  of  this 
nature  are  assignable. 

C.     Joint  and  Several  Contracts. 

I.     Intent  to  Make  Joint  or  Several  Contract. 

Keightley  v.  Watson,  j  Ex.  Rep.  (Eng.)  /i6. 

Dobbs,  Keightley  and  R.  and  H.  Watson  entered  into  an  agree- 
ment under  seal  whereby  Dobbs  agreed  to  buy  certain  land  from 
Keightley,  and  resell  it  to  the  Watsons  and  another.  The  Watsons 
made  separate  covenants  with  Dobbs  and  with  Keightley  that  they 
would  pay  the  remainder  of  the  purchase  money,  if  any  was  due. 
Upon  a  suit  by  Keightley  against  the  Watsons  for  the  remainder 
of  the  purchase  price,  it  was  insisted  that  this  was  a  joint  contract 
and  that  Dobbs  should  have  been  made  a  party  to  it. 

Held,  that  a  contract  is  to  be  construed  as  a  joint,  or  as  a 
several,  contract  according  to  the  expressed  intent  of  the  parties. 

Pollock,  C.  B. 

The  inquiry  really  is  as  to  the  true  meaning  of  the  covenant,  at 
the  same  time  bearing  in  mind  the  rule — a  rule  which  I  am  by  no 
means  willing  to  break  in  upon — that  the  same  covenant  cannot  be 
treated  as  joint  or  several  at  the  option  of  the  covenantee.  If  a 
covenant  be  so  constructed  as  to  be  ambiguous,  that  is,  so  as  to  serve 
either  the  one  view  or  the  other,  then  it  will  be  joint  if  the  interest 
be  joint,  and  it  will  be  several  if  the  interest  be  several.  On  the 
other  hand,  if  it  be  in  its  terms  unmistakably  joint,  then,  although 
the  interest  be  several,  all  the  parties  must  be  joined  in  the  action. 
So,  if  the  covenant  be  made  clearly  several,  the  action  must  be 
several,  although  the  interest  be  joint.     It  is  a  question  of  construe- 


194  COMMERCIAL    LAW    CASES 

tion.  What,  then,  in  this  case,  did  the  parties  mean  ?  The  words  of 
the  covenant  are,  "And  the  said  R.  Watson,  H.  Watson,  .  .  .  for 
themselves,  their  heirs,  executors,  administrators,  hereby  covenant 
with  the  said  W.  T.  Keightley,  his  executors,  administrators,  and 
assigns,  and  as  a  separate  covenant  with  the  said  A.  A.  Dobbs,  his 
executors,  administrators,  and  assigns,  that  they"  will  do  so  and  so. 
If  I  am  to  put  a  construction  upon  that,  I  should  say  that  it  is  intended 
to  be  a  several  or  separate  covenant.  The  words  of  this  instrument 
are  several,  and  its  terms  disclose  a  several  interest ;  the  covenant, 
therefore,  must  be  construed  according  to  the  words  as  a  several 
covenant,  and  it  appears  to  me  that  the  words  used  by  the  parties 
were  intended  to  create  such  a  covenant.  I  think,  therefore,  that  the 
plaintiff  is  entitled  to  sue  alone. 

2.     Suit  against  Joint  Contractors. 

State  of  Maine  v.  Chandler,  /p  Me.  i'/2. 

The  state  sues  the  defendants  as  sureties  on  a  joint  and  sev- 
eral bail  bond  of  one  Condon,  who  was  indicted.  They  insist  that 
Condon  should  have  been  made  a  party  to  the  suit. 

Held,  that  joint  and  several  contractors  must  be  sued  either  to- 
gether or  each  severally. 

Foster,  J. 

It  is  elementary  law  that  where  three  or  more  parties  contract 
jointly  and  severally,  all  are  to  be  sued  in  one  action,  or  each  may 
be  sued  severally.  It  is  improper,  as  all  the  authorities  hold,  to  join 
two  and  omit  the  others,  for  in  such  case  they  are  sued  neither  jointly 
nor  severally,  as  they  promised.  And  in  case  the  plaintiff  does  not 
see  fit  to  proceed  against  them  severally,  it  is  the  undoubted  right  of 
the  defendants  to  have  all  their  joint  promisors  or  obligors  joined 
with  them  in  the  suit. 

This  action,  then,  must  stand  or  fall  like  any  other  founded  upon 
contract.  It  is  brought  against  two  only  of  the  three  parties  who 
jointly  and  severally  recognized  to  the  state — now  plaintiff  in  this  suit. 
It  is  not  brought  against  them  in  accordance  with  their  obligation 
entered  into  by  them.  They  are  sued  neither  jointly  nor  severally. 
There  are  too  many  joined  as  defendants  to  correspond  with  their 
several  obligation — too  few  to  correspond  with  it  as  joint.  This  being 
so,  the  misjoinder  in  the  one  case,  or  the  non-joinder  in  the  other, 
as  we  have  said,  is  good  ground  of  demurrer,  since  the  fact  appears 
upon  the  face  of  the  plaintiff's  declaration  that  there  was  a  joint  and 
several  obligation  entered  into  by  three,  all  of  whom  are  known  as 
well  to  the  plaintiff  as  to  the  defendants  in  this  suit. 

It  makes  no  difference  that  one  of  the  recognizors  was  the  prin- 
cipal in  the  criminal  process,  and  the  other  two  were  his  sureties. 
The  recognizance  itself  determines  the  liability  of  the  parties,  and, 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  I95 

as  appears  from  the  record,  that  liability  was  joint  and  several  in 
relation  to  the  three  parties  who  became  bound  by  it.  It  was  not  a 
joint  and  several  undertaking  on  the  part  of  the  sureties  only;  and 
the  plaintifif  cannot  by  its  pleading  change  their  liability  from  that 
which  they  assumed. 

3.     Suits  on  Joint  Contracts  When  Some  of  the  Joint  Con- 
tractors are  Outside  the  Jurisdiction. 

Rand  v.  Nutter.  ^6  Me.  S39- 

Rand  sued  G.  H.  Chadwick,  W.  F.  Chadwick  and  Nutter 
jointly  on  a  joint  debt.  Nutter  was  the  only  one  within  the  juris- 
diction of  the  state  and  Rand  discontinued  suit  against  the  others. 

Held,  that  when  some  of  the  joint  contractors  are  outside  the 
jurisdiction,  the  action  may  be  brought  against  the  rest. 

Appleton,  C.  J. 

The  rule  of  the  common  law  is  well  established  that,  in  case  of 
joint  and  several  liability,  the  suit  may  be  joint  or  several.  But  when 
the  claim  is  joint,  the  action  must  be  against  all  who  are  jointly  liable. 
If  a  suit  is  brought  against  one,  the  non-joinder  of  the  others  may 
be  pleaded  in  abatement,  but  if  not  so  pleaded,  the  judgment  thus 
obtained  may  be  pleaded  in  bar  to  a  suit  brought  against  the  others. 
Thus,  if  two  are  jointly  liable  upon  a  note  or  other  joint  liability, 
a  judgment  against  one  is  a  bar  to  a  suit  against  the  other,  the  cause 
of  action  being  merged  in  the  judgment  thus  obtained.  To  this  rule 
there  are  exceptions. 

In  joint  actions,  there  may  be  a  severance  by  operation  of  law, 
as  by  bankruptcy,  infancy,  etc. ;  in  such  case,  the  plaintiff  may  pro- 
ceed without  joining  those  having  special  discharge.  So,  where  there 
are  several  defendants  sued  on  a  joint  demand,  and  some  are  without 
the  jurisdiction  and  having  no  property  within  the  same,  the  plaintiff 
may  cause  his  writ  to  be  served  on  those  within  the  state,  and  proceed 
against  them  for  a  breach  of  the  contract.  If  one  of  two  joint 
promisors  have  neither  domicile  nor  property  in  this  state,  a  separate 
action  may  be  maintained  against  the  other.  Neither  is  a  judgment 
in  another  state  against  one  of  two  joint  promisors,  without  satis- 
faction, a  bar  to  an  action  in  this  state  against  the  other  upon  the 
joint  contract.  When  one  of  two  joint  contractors  is  without  the 
state,  as  appears  by  the  officer's  return,  so  that  no  service  can  be 
made  upon  him,  judgment  may  be  rendered  against  such  of  the  joint 
contractors  as  are  found  within  the  jurisdiction,  and  such  judgment, 
remaining  unsatisfied,  is  no  bar  to  a  subsequent  suit  and  judgment 
against  the  remaining  signer  or  signers. 


196  COMMERCIAL    LAW    CASES 

4,     Release  of  One  Joint  Debtor. 

In  re  E.  IV.  A.,  a  Debtor.  ( 1901)  2  K.  B.  (Eng.)  642. 

A  bank  obtained  a  joint  and  several  judgment  against  the  debtor 
and  B.,  and  presented  a  petition  in  bankruptcy  against  B.  That 
petition  was  withdrawn  upon  terms  emhodied  in  a  receipt  in  full 
discharge  of  all  guaranties,  given  to  B.  by  the  bank  for  £3000.  The 
bank  then  presented  a  petition  against  the  debtor  for  the  alleged 
balance. 

Held,  that  a  receipt,  amounting  to  an  accord  and  satisfaction, 
equivalent  to  a  release  of  one  of  two  joint  and  several  debtors, 
will  release  both. 

Collins,  L.  J. 

The  debt  upon  which  the  petition  was  founded  in  this  case  is  a 
debt  on  a  joint  and  several  judgment  which  was  given  in  respect  of 
the  joint  and  several  liability  of  the  debtor  under  a  guarantee;  and 
the  ground  of  the  appeal  is  that  the  liability  of  the  debtor  has  been 
released  by  reason  of  the  fact  that  a  release  had  been  given  to  his 
joint  debtor. 

After  that  arrangement  was  made  with  B,  these  proceedings  in 
bankruptcy  were  commenced  against  the  present  debtor,  and  his 
answer  to  them  is  that  this  document,  when  properly  considered, 
amounts  to  an  accord  and  satisfaction  which  is  equivalent  to  a  release 
of  the  joint  debt  which  was  the  foundation  of  the  judgment,  and  is, 
therefore,  a  satisfaction  of  his  liability  under  the  judgment.  The 
question  really  turns  on  this,  whether  or  not  this  document  has  the 
effect  of  accord  and  satisfaction  in  getting  rid  of  the  joint  and  several 
liabiHty  of  B  under  the  judgment.  If  it  has  that  effect,  it  is  not 
disputed  that  the  rule  of  law  applies,  namely,  that  the  release  of  one 
of  two  joint  debtors  has  the  effect  of  releasing  the  other. 

It  is  clear  that,  although  a  document  in  terms  purports  to 
release  one  of  two  joint  debtors,  yet  it  may  contain  in  terms  a 
reservation  of  rights  against  the  other  joint  debtor.  Where  you 
find  those  two  provisions  you  construe  the  document,  not  as  a 
release,  but  merely  as  an  undertaking  not  to  sue  a  particular  in- 
dividual, and  the  result  is  that  the  right  to  proceed  against  the 
co-debtor  is  reserved  and  can  be  put  in  force  against  him.  When- 
ever you  can  find  from  the  terms  of  the  document  an  agreement  for 
the  reservation  of  rights  against  the  co-debtor,  then,  I  agree,  the 
document  cannot  be  construed  as  an  accord  and  satisfaction  of  the 
joint  debt,  and,  therefore,  as  a  release  of  the  co-debtor.  But  it 
appears  to  me  that,  on  the  face  of  this  document,  there  is  no  in- 
tention shown  so  to  limit  its  effect,  and  that  it  is  framed  in  the 
widest  possible  terms  so  as  to  cover,  not  only  this  particular  debt, 
but  all  other  claims  by  the  bank  in  connection  with  the  Profes- 
sional   and    Trades    Papers,    Limited,    for    it    is    admitted    that    the 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  IQ/ 

foundation  of  the  judgment  was  the  guarantee,  and  at  the  time  this 
document  was  drawn  up  there  was  this  joint  Hability  on  the  judgment 
to  the  extent  of  £6000.  And  there  is  this  circumstance  to  be  ob- 
served, that  this  document  expressly  states  that  the  cash  and  bills 
are   accepted   "in   full   discharge   of   all   claims   by  the   Capital   and 

Counties  Bank,  Limited,  against  Mr.   B in  connection  with  the 

Professional  and  Trades  Papers,  Limited."  Now,  having  regard  to 
the  fact  that  the  fundamental  claim  against  B  was  the  judgment 
for  £6000,  it  is  impossible  to  say  that  this  judgment  is  not  one  of 
the  "claims"  within  the  words  I  have  read. 

The  person  giving  it  may  not  realize  the  full  legal  consequences 
of  it  as  regards  the  release  of  the  co-debtor;  but  that  is  not,  in 
my  opinion,  a  sufficient  ground  for  reading  into  the  document  some- 
thing that  is  not  expressed  in  it;  and  unless  you  find  in  it  some- 
thing qualifying  the  general  words,  it  appears  to  me  that  the  legal 
consequences  of  the  general  words  of  discharge  must  follow,  not- 
withstanding that  those  consequences  may  go  beyond  what  the  person 
giving  the  document  would  have  intended  if  they  had  been  pointed  out 
to  him  at  the  time,  and  if  he  had  had  an  opportunity  of  addressing 
his  mind  to  them. 

5.     Suit  by  Joint  Contractors. 

Capen  v.  Barrows,  i  Gray  (Mass.)  j/d. 

Capen,  Clapp,  and  Barrows  formed  a  partnership,  agreeing  to 
give  their  whole  time  and  attention  to  the  business.  This  Barrows 
did  not  do,  and  Capen  sues  him  at  law  without  jdining  Clapp. 

Held,  that  one  of  several  joint  contractors  cannot  sue  sepa- 
rately. (The  action  could  not  be  maintained  for  the  further  reason 
that  suits  between  partners  must  as  a  general  rule  be  brought 
in  equity.) 

Metcalf,  J. 

The  defendant's  covenants,  declared  on  in  this  case,  were  made 
with  the  plaintiff  and  Clapp  jointly  and  not  severally,  and  there- 
fore if  an  action  at  law  can  be  maintained  on  those  covenants,  it 
must  be  an  action  by  the  plaintiff  and  Clapp.  It  is  a  settled  rule 
of  construction,  that  when  the  legal  interest  in  a  covenant  and  in 
the  cause  of  action  thereon  is  joint,  the  covenant  is  joint,  although 
it  may,  in  its  terms,  be  several,  or  joint  and  several,  "i.  Where 
the  covenant  is  in  its  terms  several,  but  the  interest  of  the  cove- 
nantees is  joint,  they  must  join  in  suing  upon  the  covenant.  2.  Where 
the  covenant  is  in  its  terms  expressly  and  positively  joint,  the  cov- 
enantees must  join  in  an  action  upon  the  covenant,  although  as  be- 
tween themselves  their  interest  is  several.  3.  Where  the  language 
of  the  covenant  is  capable  of  being  so  construed,  it  shall  be  taken 
to  be  joint  or  several,  according  to  the  interest  of  the  covenantees." 


198  COMMERCIAL    LAW    CASES 

The  present  case  comes  within  the  third  of  the  foregoing  rules. 
The  covenants  in  suit,  not  being  in  terms  either  joint  or  several,  are 
capable  of  being  construed  according  to  the  interest  of  the  covenantees. 
And  their  interest,  legal  and  beneficial,  is  clearly  joint  and  not  several. 
They  were  co-partners,  and  the  interest  of  each  is  the  same  in  kind  and 
amount,  and  each  is  equally  injured  by  a  breach  of  those  covenants. 
And  the  defendant  ought  not  to  be  held  liable  to  two  actions  for  the 
same  breach. 

6.     Right  of  Joint  Contractor  to  Contribution  from  the  Others. 

Putnam  v.  MisocJii.    i8p  Mass.  421. 

Putnam,  a  stockholder  of  a  Maine  corporation,  who  had  been 
forced  to  pay  judgment  creditors  of  the  corporation  to«the  amount 
of  his  unpaid  subscription,  seeks  to  recover  from  Misochi  and 
others,  also  stockholders  whose  subscriptions  were  not  fully  paid, 
their  proportionate  share  of  stich  payments. 

Held,  that  a  person  jointly  liable  with  others  for  a  debt  which 
he  alone  is  forced  to  pay,  is  entitled  to  contribution  from  the 
others. 

Knowlton,  C.  J. 

It  is  a  familiar  principle  that,  when  several  parties  are  equally 
liable  for  the  same  debt  and  one  is  compelled  to  pay  the  whole  of 
it,  he  may  have  contribution  against  the  others  to  obtain  from 
them  the  payment  of  their  respective  shares.  This  right  to  con- 
tribution is  not  founded  upon  contract,  but  upon  a  principle  of 
natural  equity  and  justice.  "The  doctrine  of  contribution  rests 
on  the  principle  that  when  the  parties  stand  in  eqiiali  jure,  the 
law  requires  equality  which  is  equity,  and  one  of  them  shall  not 
be  obliged  to  bear  the  burden  in  ease  of  the  rest.  It  is  founded, 
not  on  contract,  but  on  the  principle  that  equality  of  burden  as 
to  common  right,  is  equity.  And  the  obligation  to  contribute  arises 
from  the  nature  of  the  relation  between  the  parties."  The  prin- 
ciple has  long  been  applied  to  the  liability  of  stockholders  in  cor- 
porations for  the  corporate  debts.  "A  court  of  chancery  will  compel 
subscribers  to  pay  in  full  the  amount  of  their  unpaid  subscriptions 
if  the  corporate  indebtedness  make  it  necessary,  leaving  them  to  seek 
contribution  from  the  other  stockholders.  The  rule,  however,  is 
well  settled  that  a  stockholder  who  has  been  compelled  to  pay  more 
than  his  proportion  of  the  debts  of  the  company  may  maintain  an 
action  against  his  co-stockholders  for  contribution."  The  neglect  of  a 
sub.scriber  for  stock  to  pay  for  it  in  full  is  not  a  tort,  which  deprives 
him  of  his  right  to  contrilnition ;  but  it  leaves  him  in  the  position 
of  a  surety,  who  is  liable  for  a  debt  equally  with  other  sureties. 
This  is  recognized  in  the  numerous  suits  for  contribution  by  stock- 
holders which  are  sustained  by  the  courts. 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  I99 

The  fact  that  the  plaintiff,  after  satisfying  the  judgment,  made 
no  demand  upon  the  corporation  and  took  no  action  against  it, 
under  the  Revised  Statutes  of  Maine,  does  not  affect  his  right  to 
contribution. 

The  contribution  should  be  decreed  against  the  solvent  defend- 
ants who  are  w^ithin  this  jurisdiction. 


II. 
CONSTRUCTION  OF  CONTRACTS. 

Contracts  are  to  be  interpreted  by  the  following  rules : 

1.  The  contract  will  be  given  that  meaning  which  makes  it 
valid,  rather  than  invalid,  and  reasonable  rather  than  unreasonable. 
The  meaning  of  general  words  will  be  restricted  to  the  parts  of  the 
contract  to  which  they  are  intended  to  apply.  Obvious  mistakes 
of  writing  or  grammar,  incltiding  punctuation,  will  be  corrected. 

2.  Words  are  to  be  understood  in  their  plain  and  literal  mean- 
ing, though  technical  words  are  to  be  given  their  technical  construc- 
tion. Words  are  construed  most  strongly  against  the  party  who 
has  used  them.  When  there  is  a  confliction  between  printed  and 
written  words,  the  latter  control. 

3.  Usage  may  vary  the  usual  meaning  of  words.  In  order 
that  it  shall  affect  a  contract,  it  must  have  existed  at  the  time  the 
contract  was  made ;  be  general,  definite,  reasonable,  and  not  op- 
pressive ;  and  not  inconsistent  with  any  rule  of  law  or  with  the 
terms  of  the  contract. 

4.  If  the  meaning  of  the  contract  is  doubtful,  the  construction 
given  by  the  parties  is  of  weight  in  determining  the  true  meaning. 
Terms  obviously  intended  to  be  included  in  the  contract  may  be 
read  into  it,  and  the  law  will  itself  imply  necessary  terms  which 
have  been  omitted  through  oversight. 

When  no  time  for  performance  is  fixed,  the  contract  is  con- 
sidered to  intend  a  reasonable  time.  Time  itself  is  generally  not 
of  the  essence  of  the  contract,  unless  it  appears  that  such  is  the 
intention  of  the  parties.  From  this,  it  ordinarily  follows  that  a 
party  in  default  on  account  of  time  may  sue  upon  the  contract, 
and  only  such  damages  as  proximately  result  from  his  failure  to 
complete  the  contract  within  the  time  specified  will  be  deducted. 
The  parties  may,  however,  make  time  a  condition  of  the  contract. 
Equity  is  somewhat  more  liberal  in  regard  to  stipulations  as  to 
time  than  are  the  courts  of  law. 

Terms  of  a  contract  to  be  performed  by  the  respective  parties 
may  be  independent  of  each  other  or  the}'  may  each  be  dependent 


200  COMMERCIAL   LAW    CASES 

upon  the  performance  of  the  other.  Terms  are  construed  to  be 
independent  if  an  absokite  promise  is  given  in  return  for  another 
equally  absolute  promise.  When  a  contract  is  divisible,  a  breach 
of  one  promise  will  not  discharge  the  whole  contract  but  will 
warrant  damages  only  to  the  extent  of  that  breach.  Failure  to 
perform  a  subsidiary  promise,  whether  independent  or  dependent, 
will  not  discharge  the  contract  unless  it  is  vital  to  the  obligation. 
Dependent  terms,  generally  conditions  of  the  contract,  are  classified 
as  conditions  precedent,  concurrent,  and  subsequent.  A  condition 
precedent  is  a  term  which  must  be  performed  by  one  party  before 
there  is  any  obligation  of  performance  on  the  other ;  a  condition 
concurrent,  generally  impossible  except  in  contemplation  of  law, 
is  similar  to  a  condition  precedent  and  must  be  performed  con- 
currently with  performance  by  the  other  party ;  a  condition  subse- 
quent is  a  condition  which  operates  to  discharge  an  existing  obli- 
gation of  performance  upon  the  occurrence  of  circumstances  con- 
templated by  the  contract. 

A.     Legal  Effect  of  Language. 

I.     Intent  of  Parties. 

Hawes  v.  Smith.  12  Me.  42^. 

Smith  went  bail  for  Nealley,  who  had  been  arrested  on  civil 
process  by  Hawes  and  Lyon.  He  agreed  in  consideration  of  the 
release  of  Nealley  to  pay  "all  sums  of  money  as  may  now  be  due 
and  owing  from  the  said  Nealley,  whether  on  note  or  account." 
Hawes  contends  that  this  included  notes  made  but  not  yet  payable. 

Held,  that  contracts  are  to  be  interpreted  according  to  the  intent 
of  the  parties. 

Parris,  J. 

If  such  was  the  understanding  of  the  parties,  if  they  made 
such  a  contract,  they  are  to  be  held  to  it.  It  is  our  business  to 
enforce,  not  to  make,  contracts  for  parties.  But  it  is  not  for  us 
to  enforce  as  an  aj^reement  what  the  parties  never  assented  to. 

It  is  admitted  that  the  language  of  the  promise,  according  to 
its  strict  legal  import,  might  embrace  all  that  is  contended  for  by 
the  plaintiff.  But  cases  often  arise  wliere  the  meaning  of  language 
is  to  be  accommodated  to  the  situation  and  circumstances  of  the 
parties  using  it.  Nothing  can  be  more  equitable  than  that  the 
situation  of  the  parties,  the  subject  matter  of  their  transactions 
and  tile  whole  language  of  their  instruments  should  have  operation 
in  settling  the  legal  effect  of  their  contract; — and  it  would  be  a 
disgrace  to  any  system  of  jurisprudence  to  permit  one  party  to  catch 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  20I 

another,  contrary  to  the  spirit  of  their  contract,  by  a  form  of  words 
which  perhaps  neither  party  understood. 

The  maxims  for  the  exposition  of  contracts  are  simple  and 
consistent,  and  well  calculated  to  effect  their  sole  object;  namely, 
to  do  justice  between  the  parties  by  enforcing  a  performance  of 
their  agreement,  according  to  the  sense  in  which  they  mutually 
understood  it  at  the  time  it  was  made; — and  all  latitude  of  construc- 
tion must  submit  to  this  restriction,  that  the  words  and  language 
of  the  instrument  bear  the  sense  intended  to  be  put  upon  them. 

The  plain,  ordinary  and  popular  sense  or  meaning  of  the  terms 
adopted  by  the  parties  shall  prevail.  It  never  was  a  rule  of  con- 
struction that  the  words  in  a  contract  were  to  be  taken  in  their 
technical  sense,  but  according  to  their  proper  and  most  known  sig- 
nification, that  which  is  most  in  use.  The  necessary  use  of  par- 
ticular technical  expression  is  chiefly  regarded  in  the  sense  of  law 
terms.  The  rules  laid  down  in  respect  to  the  construction  of  contracts 
are  founded  in  law,  reason  and  common  sense ;  that  they  shall  operate 
according  to  the  intention  of  the  parties,  if  by  law  they  may; 
and  if  they  cannot  operate  in  one  form,  they  shall  operate  in  that 
which  by  law  will  effectuate  the  intention. 

In  the  construction  of  agreements  the  intention  of  the  parties 
is  principally  to  be  attended  to. 

We  can  have  no  doubt  from  the  situation,  circumstances  and 
objects  of  the  parties,  as  they  are  developed  in  their  written  agree- 
ment, that  the  phraseology,  "all  such  sums  of  money  as  may  now  be 
due  and  owing,  whether  on  note  or  account,"  was  supposed  and  in- 
tended to  mean  and  include  only  such  as  were  then  payable,  and  for 
the  recovery  of  which  Neally  had  been  arrested,  and  this,  no  doubt, 
would  be  considered  the  popular  meaning  of  such  language,  although 
we  admit  that  the  strict  technical  or  legal  significance  of  the  terms 
may  be  different. 

2.     Correction  of  Obvious  Mistakes. 

Sisson  V.  Donnelly,   jd  A^.  /.  L.  4^2. 

Peters  gave  a  deed  to  Harrison  without  inserting  the  word 
"heirs"  in  the  deed,  the  legal  effect  of  which  omission  was  that 
Harrison  received  only  a  life  estate.  A  second  instrument  under 
seal  was  prepared  between  Peters  as  party  of  the  first  part,  Har- 
rison as  party  of  the  second  part,  and  Burden  as  party  of  the 
third  part,  which  recited  that  Peters  had  previously  mortgaged 
the  premises  to  Burden  giving  him  by  mistake  only  a  life  estate, 
and  that  Peters  and  Harrison  agreed  that  Burden  should  take  a 
fee  simple.  The  lower  court  held  that  this  deed  was  sufficient  to 
vest  the  fee  in  Harrison  without  recourse  to  the  previous  deed,  as 
it  ran  to  "the  party  of  the  second  part,"  instead  of  to  "the  party 
of  the  third  part,"  as  was  intended.    The  plaintiff,  Sisson,  had  a 


202  COMMERCIAL    LAW    CASES 

deed   from   Peters'   heir   conveying   full   ownership   to   him,   and 
brings  this  suit  to  establish  his  title. 

Held,  that  obvious  mistakes  in  a  written  instrument  may  be 
corrected. 

Beasley,  C.  J. 

The  intention  of  the  parties  is  clear  on  the  face  of  the  con- 
veyance, the  only  question  being  whether  or  not  the  deed  can  be  read 
so  as  to  effectuate  such  intention. 

The  rule  of  construction,  which  is  universal  and  is  applicable 
to  conveyances  as  well  as  to  all  other  kinds  of  deeds  is  that  it  "be 
favorable  and  as  near  the  minds  and  apparent  intents  of  the  parties 
as  it  possibly  may  be,  and  the  law  will  permit."  This  has  ever  since 
and  in  a  great  multitude  of  cases,  been  recognized  as  the  leading 
canon  in  giving  effect  to  every  variety  of  written  instruments.  "The 
primary  object  of  inquiry  is  the  intention  of  the  parties,  and  where 
that  is  on  the  face  of  the  instrument,  clearly  and  satisfactorily 
ascertained,  and  found  not  to  be  contrary  to  any  rule  of  law,  the 
court  is  bound,  if  the  words  will  admit  of  a  construction  conform- 
able to  the  intention,  to  adopt  that  construction,  however  contrary 
it  may  be  to  technical  meaning  and  inference." 

It  will  be  observed  that  by  the  limitations  of  the  rule  itself, 
the  intention  is  to  be  enforced  whenever  "the  law  will  permit." 
I  take  that  to  mean  that  the  intention  will  prevail  whenever  such 
intention  is  unmistakably  manifested,  having  regard  to  all  parts 
of  the  instrument,  unless  the  law  requires  the  use  of  technical  terms 
to  effectuate  such  intention,  or  unless  such  intent  is  contrary  to  legal 
rules.  The  first  of  these  classes  of  cases  is  aptly  exemplified  by 
the  imperfect  form  of  the  deed  to  which  I  first  called  attention. 
It  created  but  a  life  estate,  and  it  was  insisted  that  the  intention  was 
to  create  a  fee ;  but  such  intention  could  not  have  been  carried  into 
effect,  no  matter  how  plainly  apparent,  because  the  law  requires 
the  use  of  certain  terms  of  art  in  the  creation  of  a  fee  simple.  So, 
as  an  illustration  of  the  second  branch  of  the  exception,  "If  one 
give  land  to  another  and  his  heirs  for  twenty  years,  in  that  case 
the  executor,  and  not  the  heir,  shall  have  that  land  after  the  death 
of  him  to  whom  it  is  given."  But,  unless  in  these  instances,  where 
artificial  terms  are  requisite,  or  an  attempt  is  made  to  do  something 
inconsistent  with  established  principles,  I  am  not  aware  of  any 
exception  to  the  rule  that  the  intention  of  the  party  must  prevail. 
There  appears  to  be  nothing  technical  in  legal  regulations  respecting 
the  description  of  the  parties  to  written  instruments.  Unless  a 
misdescription  in  this  particular  renders  a  deed  uncertain  as  to  its 
meaning,  such  defect  is  of  no  consequence.  A  plain  misnomer  can 
do  no  hurt,  the  only  question  being  whether  it  is  clear  who  is 
intended.  It  has  been  decided  that  a  mistake  in  the  christian  name 
is  immaterial,  if  the  deed  explains  who  is  intended.  "A  deed,  to 
kolxrt,  iiisliop  of  K.,  will  be  good,  though  his  real  name  is  Roland." 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  2O3 

So  where  a  deed  purported  to  be  that  of  a  married  woman,  her 
name  only  appearing  as  grantor,  but  it  was  signed  by  her  and  her 
husband,  it  was  held  to  be  good  as  a  grant  of  the  husband  as  well  as 
the  wife.  And  an  omission  by  an  evident  mistake  of  the  name  of 
the  grantor  in  a  deed  of  bargain  and  sale,  was  supplied  by  intend- 
ment, "and  the  court  was  of  opinion  that  this  deed  passes  the  free- 
hold, because  such  was  the  intention  of  it."  I  think  it  is  not  reasonably 
to  be  denied,  that  if  the  name  of  a  party  which  has  been  altogether 
omitted  in  the  operative  part  of  a  deed  can  be  inserted,  when  read 
by  the  court,  on  the  ground  that  the  meaning  of  the  instrument  to 
that  effect  is  clear,  from  the  same  consideration,  the  erroneous  desig- 
nation of  the  grantee  may  be  rectified.  In  my  opinion,  the  deed 
under  consideration  is  to  be  read  as  though  the  grantee  was  de- 
scribed according  to  what  parties  plainly  meant,  as  the  party  of  the 
third  part.  Under  this  construction,  no  title  to  the  premises  in  dis- 
pute ever  came  to  the  defendants  by  the  operation  of  this  tripartite 
deed. 

3.     Effect  of  General  Words. 

Vatighan  v.  Porter.  i6  Vt.  26J. 

Vaughan  sold  Porter  a  patent  for  making  "Vaughan's  Patent 
Balance"  under  an  agreement  that  "if  there  should  be  any  defect 
in  said  patent,  whereby  all  its  privileges  cannot  be  enforced,  or 
if  there  should  be  any  other  defect  whatever,"  the  contract  should 
be  void.  In  a  suit  by  Vaughan  for  the  price.  Porter  contends 
that  the  balance  was  likely  to  get  out  of  order  and  therefore  within 
the  expression,  "other  defect." 

Held,  that  the  efifect  of  general  expressions  is  to  be  restricted 
to  that  part  of  the  contract  to  which  they  are  intended  to  apply. 

Redfield,  J. 

Now  it  is  obvious,  we  think,  for  two  reasons,  that  the  con- 
dition of  the  contract  had  reference  to  no  such  defects  as  those 
alluded  to  in  the  requests. 

1.  It  is  hardly  supposable  that  the  general  expression,  "or 
if  there  should  be  any  other  defect  whatever,"  could  have  been  in- 
tended to  include  all  possible  defects  in  the  machine.  That  would 
be  to  stipulate  that  the  machine  should  be  perfect,  which  is  im- 
possible ;  and  such  a  stipulation  would  render  the  contract  void 
on  its  face,  which  would  be  absurd.  If,  then,  it  does  not  extend 
to  all  defects,  to  what  defects  docs  it  extend?  This  brings  us  to 
the  second  reason. 

2.  That  this  general  expression  must  be  confined  to  the  same 
class  of  defects  before  enumerated.  The  expression,  any  other 
defect,  presupposes  that  some  defects  had  been  already  enumerated, 
and  that  this  sweeping  expression  had  reference  to  the  same  class  of 


204  COMMERCIAL    LAW    CASES 

defects.  The  other  defects,  by  reference  to  the  contract,  were  all 
defects  in  the  patent,  and  not  in  the  machine.  This  expression,  then, 
clearly  was  intended  to  include  all  possible  defects  in  the  patent,  and 
nothing  more. 

4.     Technical  Words. 

Collender  v.  Dinsmore.  55  N.  Y.  200. 

Phelan  &  Collender  shipped  merchandise  to  Nova  Scotia  by 
the  Adams  Express  Company,  of  which  Dinsmore  was  presi- 
dent, and  took  a  receipt  which  specified  "C.O.D.  $375,  from  Turn- 
er's Express,  Boston,  Mass."  The  Adams  Express  Company  did 
not  collect  the  $375  from  Turner's  Express  Company  and  the  plain- 
tiffs sue  for  its  failure  to  do  so.  The  defendants  contend  that 
the  contract  meant  simply  that  the  goods  were  to  be  delivered  to 
Turner's  Express  Company  which  should  collect  the  amount. 

Held,  that  technical  words  are  to  be  construed  according  to  their 
technical  meaning. 

Allen,  J. 

The  rule  is  that  words,  or  forms  of  expression  which  are  not 
of  universal  use,  but  are  purely  local  or  technical,  may  be  ex- 
plained by  parol  evidence,  and  the  same  is  true  of  words  or  phrases 
having  two  meanings,  one  common  and  universal,  and  the  other  pecu- 
liar, technical  or  local.  In  such  case  parol  evidence  may  be  given 
of  facts  tending  to  show  in  which  sense  the  words  were  used. 
Where  characters,  marks  or  technical  terms  are  used  in  a  particular 
business,  unintelligible  to  persons  unacquainted  with  such  business, 
and  occur  in  a  written  instrument,  their  meaning  may  be  explained  by 
parol  evidence,  if  the  explanation  is  consistent  with  the  terms  of 
the  contract. 

To  the  usual  symbolical  direction  ordinarily  accompanying  mer- 
chandise by  express,  subject  to  charges,  are  [added]  the  words,  "from 
Turner's  Express,  Boston,"  so  that  it  reads  "Collect  on  delivery  $375 
from  Turner's  Express,  Boston."  The  direction  is  a  very  plain  and 
direct  one  to  collect  $375  from  Turner's  Express,  and  can  only  be 
read  as  a  direction  to  collect  from  that  company,  on  delivery  of 
the  goods  to  it,  the  sum  mentioned;  and  it  can  only  receive  another 
or  different  interpretation  by  a  change  in  the  language  used,  as  by 
inserting  "by"  in  place  of  "from,"  or  by  some  other  change  which 
would  give  the  phrase  a  meaning  different  from  that  which  it  would, 
in  the  language  which  the  parties  have  used,  ordinarily  have.  The 
evidence  of  the  meaning  put  upon  the  simple  direction  to  "collect 
on  delivery,"  by  usage,  docs  not  aid  in  interpreting  a  direction  so 
entirely  different  as  this  is,  by  the  addition  of  a  very  material 
clause.  The  right  of  the  parties  to  make  a  different  contract  can- 
not be  denied  them,  and  every  contract  must  be  interpreted  accord- 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  205 

ing  to  its  peculiar  terms,  and  a  change  so  essential  as  this  cannot 
be  assumed  to  have  been  made  unintentionally.  The  words  added  to 
the  usual  contract  are  of  familiar  and  universal  use,  and  have  a 
well-defined  meaning;  they  are  not  technical  or  peculiar,  or  used 
only  in  a  particular  business;  and  there  is  no  evidence  that  they 
were  ever  used  in  any  other  than  the  usual  and  ordinary  sense. 

It  was  not  competent  for  the  defendants  to  prove  the  meaning 
of  the  contract;  they  could  only  prove  the  peculiar  meaning  of 
technical  words  used;  and  if  words  of  universal  use  were  used  in 
a  technical  or  peculiar  sense,  they  could  prove  facts  tending  to 
show  that  they  were  thus  used;  but  this  being  done  it  was  for  the 
court  to  interpret  the  contract.  Neither  was  it  competent  for  the 
plaintiff  to  prove  a  custom  or  usage  inconsistent  with  the  terms  of 
the  contract;  and.  if  the  language  was  explicit,  it  could  not  be 
varied  or  contradicted  by  parol  evidence,  or  meaning  given  to  the 
contract  different  from  that  called  for  by  its  terms. 

Custom  and  usage  is  resorted  to  only  to  ascertain  and  explain 
the  meaning  and  intention  of  the  parties  to  a  contract  when  the 
same  could  not  be  ascertained  without  extrinsic  evidence,  but  never 
to  contravene  the  express  stipulations ;  and  if  there  is  no  uncer- 
tainty as  to  the  terms  of  a  contract,  usage  cannot  be  proved  to 
contradict  or  qualify  its  provisions.  In  matters  as  to  which  a  con- 
tract is  silent,  custom  and  usage  may  be  resorted  to  for  the  pur- 
pose of  annexing  incidents  to  it.  But  the  incident  sought  to  be 
imported  into  the  contract  must  not  be  inconsistent  with  its  express 
terms  or  any  necessary  implication  from  those  terms.  Usage  is  some- 
times admissible  to  add  to  or  explain,  but  never  to  vary  or  contra- 
dict, either  expressly  or  by  implication,  the  terms  of  a  written 
instrument,  or  the  fair  and  legal  import  of  a  contract.  As  before 
suggested,  there  was  no  evidence  of  any  usage  which  could  add  to, 
vary  or  affect,  in  any  way,  the  meaning  of  the  words  "from  Turner's 
Express,  Boston." 

They  are  to  receive  the  interpretation  and  have  the  meaning 
given  them  which  they  have,  as  universally  used;  and  in  no  waj'  can 
they  be  read  except  as  a  direction  to  collect  the  money  specified 
from  Turner's  Express,  on  the  delivery  of  the  merchandise  to  that 
company.  Whether  such  a  direction  was  reasonable  or  unreasonable 
is  not  for  us  to  consider. 

5.     Effect  of  Custom. 

Coyiahnn  v.  Fisher.  2^^  Mass.  2^4. 

Mrs.  Conahan  was  injured  by  falling  through  a  defective  rail- 
ing of  a  veranda,  which  the  court  found  not  to  be  within  the  con- 
trol of  the  landlord,  against  whom  this  suit  is  brought  for  her  in- 
juries. However,  the  plaintiff  attempts  to  show  a  custom  in 
Boston  that  the  owner  shall  make  necessary  repairs  and  keep  the 
property  tenantable. 


206  COMMERCIAL    LAW    CASES 

Held,  that  a  contract  is  not  to  be  interpreted  by  reference  to 
a  custom  which  is  contrary  to  positive  law. 

Rugg,  C.  J. 

A  thorough  discussion  of  the  nature  of  custom  or  usage,  the 
field  of  human  relations  which  may  be  affected  thereby,  and  the 
bounds  to  which  it  is  subject,  is  found  in  Dickinson  v.  Gay,  7  Allen 
29,  where  previous  decisions  are  reviewed,  and  the  controlling  prin- 
ciple on  the  subject  is  deduced  and  formulated.  It  there  was  held 
in  effect  that,  although  often  a  usage  or  custom  has  been  sustained 
or  rejected  on  the  ground  that  it  was  or  was  not  regarded  as  reason- 
able, the  true  principle  is  that  a  custom  or  usage,  "having  refer- 
ence to  the  methods  of  transacting  business,"  is  valid,  but  one 
which  relates  to  the  "mere  adoption  of  a  peculiar  or  local  rule  of 
law,  contrary  to  the  terms  of  the  contract  or  to  a  general  rule  of 
law  applicable  to  its  construction,"  is  invalid.  Respecting  the  al- 
leged custom  there  in  question  of  holding  a  merchant,  selling  goods 
by  sample,  where  both  sample  and  the  bulk  delivered  contained  a 
latent  defect,  nevertheless  responsible  as  upon  a  warranty  against 
defect,  it  was  said,  "the  usage  proved  does  not  relate  to  any  par- 
ticular course  of  dealing,  but  is  the  adoption  of  a  mere  doctrine 
as  to  the  rights  and  obligations  of  the  parties  under  a  contract  of 
sale,  which  doctrine  is  contrary  to  the  rule  of  the  common  law  on 
the  subject.  It  holds  that  a  warranty  is  implied,  when  by  law  it 
is  not  implied.  There  is  no  necessity  for  such  usages;  because  if 
the  parties  agree  that  there  shall  be  a  warranty  where  the  law  im- 
plies none,  they  can  insert  the  warranty  in  the  bill  of  sale;  or  if 
the  manufacturer  sells  without  warranty,  he  can  so  express  it.  But 
if  such  usages  were  to  prevail  they  would  be  productive  of  misunder- 
standing, litigation  and  frequent  injustice,  and  would  be  deeply  in- 
jurious to  the  interests  of  trade  and  commerce.  They  would  make 
it  necessary  to  prove  the  law  of  the  case  by  witnesses  on  the  stand, 
and  it  would  be  settled  by  the  jury  in  each  particular  case.  Public 
policy,  therefore,  requires  that  when  parties  assume  obligations 
which  the  law  does  not  impose,  or  release  obligations  which  it  does 
impose,  it  should  be  done  by  express  contract."  That  statement  of 
law  is  precisely  applicable  to  the  custom  here  sought  to  be  shown. 

The  law  itself  has  fixed  with  precision  the  respective  rigiits 
and  obligations  of  landlord  and  tenant  under  an  oral  lease  as  to 
repairs  upon  the  demised  premises  in  the  absence  of  definite  con- 
tract. It  is  beyond  the  province  of  custom  to  vary  this  rule.  It 
can  be  done  only  by  express  contract.  Two  diametrically  opposed 
princij)k'S  of  law  cannot  govern  the  same  facts  at  the  same  moment. 

(iencral  commercial  cu.stoms  or  particular  usages  of  trade,  when 
not  contrary  to  the  express  terms  or  necessary  implications  of  the 
contract,  or  a  special  meaning  attaching  under  the  dialect  of  a 
particular  business,  occupation  or  i)rofession  to  the  use  of  a  word 
or  nil  rase,  and   not  invokint:  the  ai)i)lication  of  law  contrary  to  the 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  20/ 

established  principles  of  the  common  or  statutory  law,  are  valid. 
But  customs  which  are  in  conflict,  either  with  the  express  or  implied 
terms  of  the  contract,  or  undertake  to  avoid  the  effect  of  settled 
rules  of  law,  or  to  make  for  a  definite  class  of  cases  or  persons 
a  law  singular  unto  such  class,  are  bad. 

6.     Requisites  of  Valid  Custom. 

Strong  v.  The  Grand  Trunk  Railroad  Company.  75  Mich.  206. 

Strong's  schooner  carried  corn  from  Chicago  to  Sarnia,  and 
delivered  it  to  the  defendant  railroad  as  intermediate  consignee. 
The  railroad  refused  to  pay  the  freight  except  subject  to  a  deduc- 
tion of  the  value  of  a  deficiency  of  some  200  bushels,  which  was 
indicated  by  comparison  with  an  inaccurate  bill  of  lading.  The 
railroad  justified  its  refusal  to  pay  upon  the  ground  that  there 
was  a  custom  to  make  such  deduction. 

Held,  that  a  custom  is  not  to  be  considered  a  term  of  the  con- 
tract unless  it  is  general  and  uniform. 

Cooley,  J. 

There  can  be  no  doubt  that  although  the  bill  of  lading  specifies 
the  amount  received,  it  is,  notwithstanding,  like  other  receipts, 
open  to  explanation,  and  the  carrier  is  at  liberty  to  show  that  the 
actual  amount  which  came  to  his  hands  is  different  from  that 
stated.  The  qualification  of  this  rule  is  where  third  persons  have 
acquired  rights  by  purchase  or  advance  of  money,  based  upon  the 
statement  contained  in  the  bill  of  lading,  and  relying  upon  its 
accuracy :  the  extent  of  which  qualification,  and  when  and  against 
whom  applicable,  it  does  not  become  important  to  discuss  here,  in- 
asmuch as  it  is  not  claimed  that  any  such  rights  have   intervened. 

Although  the  consignee  of  property  is  authorized  to  recoup 
from  the  freight  earned  any  losses  properly  chargeable  to  the  car- 
rier, it  is  well  settled,  and  indeed  follows  logically  from  the  rule 
before  stated,  that  he  is  not  entitled  to  deduct  as  deficiencies  any 
difference  between  the  amount  delivered  to  him,  and  that  receipted 
by  the  bill  of  lading,  where  the  carrier  can  show  an  error  in  the 
bill,  and  that  he  actually  delivered  all  that  he  received. 

The  custom  alleged,  if  valid,  changes  the  settled  law  in  several 
important  particulars. 

There  are  many  customs  which,  to  a  certain  extent,  are  con- 
venient, but  to  which  the  law  does  not  allow  a  compulsory  force, 
either  because  they  have  never  been  generally  acquiesced  in,  or 
because,  to  give  them  general  application,  would  in  some  cases  violate 
fundamental  principles  and  rights.  The  law  has  established  certain 
rules  which  are  to  test  the  legal  validity  of  a  custom ;  and  we  shall 
now  examine  the  one  alleged,  in  the  light  of  the  standard  thus 
afforded. 


208  COMMERCIAL    LAW    CASES 

1.  Before  any  custom  can  be  admitted  into  the  law,  it  must  ap- 
pear that  the  usage  has  been  general  and  uniform,  the  custom  peace- 
ably acquiesced  in,  and  not  subject  to  contention  and  dispute.  It 
is  not  very  clear  that  the  evidence  in  this  case  establishes  any 
such  custom. 

2.  Another  essential  to  a  good  custom  is,  that  it  be  certain. 
The  evidence  of  usage  in  this  case  does  not  inform  us  whether, 
under  it,  the  carrier  is  to  have  any  remedy  for  the  freight  deducted, 
and  if  he  is,  whether  that  remedy  is  left  to  common  law  rules,  or 
is  provided  for  by  the  custom  itself. 

3.  All  customs  must  be  reasonable.  If  the  one  in  question  were 
confined  to  vesting  in  the  intermediate  consignee  the  same  power  to 
refuse  to  pay  freight  in  cases  in  which  the  owner  would  be  justified 
in  doing  so,  it  would  not  exceed  the  reasonable  province  of  a  mer- 
cantile usage.  But  it  goes  very  much  further  when  it  makes  the 
bill  of  lading  conclusive  in  favor  of  the  intermediate  carrier,  and 
allows  him  to  make  deductions  for  supposed  deficiencies,  not  in  fact 
existing,  which  the  owner  himself  would  not  be  permitted  to  make. 

7.     Construction  of  Terms  in  Order  to  Give  Contract  Validity. 

Hunter  v.  Anthony.  5j  A^.  C.  ^85. 

Holt  gave  an  order  to  Hyinter,  a  constable,  directing  Anthony 
to  pay  to  Hunter  all  executions  against  Holt  and  his  brother  in 
Hunter's  hands  "as  they  become  due."  This  order  Anthony 
accepted.  Hunter  now  seeks  to  hold  Anthony  on  certain  execu- 
tions which  had  been  stayed  at  the  time  of  the  order,  although 
they  were  in  the  hands  of  the  officer  for  collection. 

Held,  that  the  terms  of  a  contract  are  to  be  construed  in  such 
a  way  as  to  make  it  valid  rather  than  invalid. 

Pearson,  C.  J. 

The  papers  which  were  in  the  hands  of  the  plaintifiF  can  be 
made  to  fit  the  description  given  in  the  acceptance  of  the  defendant 
by  aid  of  the  maxim  that  instruments  should  be  liberally  construed, 
so  as  to  give  them  effect  and  carry  out  the  intention  of  the  parties; 
and  when  an  instrument  is  susceptible  of  two  constructions,  one 
by  which  it  will  take  effect,  and  the  other,  by  which  it  will  be  in- 
oi)erative  for  the  want  of  a  subject-matter  to  act  on,  it  shall  receive 
that  construction  which  will  give  it  effect.  This  rule  is  based  on 
the  presumption  that  when  parties  make  an  instrument,  the  inten- 
tion is  that  it  shall  l)e  effectual,  and  not  nugatory. 

"Executions  in  the  hands  of  an  officer,"  taken  literally,  would 
apply  to  process  in  his  hands  which  was  then  in  a  condition  to  be 
acted  on,  and  would  not  fit  judgments  in  the  officer's  hands,  on 
which  execution  had  been  stayed;  but  by  aid  of  the  words,  "as 
they  become  due,"  we  see  that  the  word,  "executions"  is  not  to  be 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  2O9 

taken  literally,  for  the  papers  to  which  reference  was  made  were 
some  that  were  about  to  become  due  at  different  times ;  and  taking 
the  whole  description,  they  as  aptly  point  out  judgments  on  which 
were  entered,  "executions  issued  and  stayed,"  as  any  other  terms 
of  description  that  could  have  been  used. 

The  suggestion  that  these  words  ought  to  be  considered  sur- 
plusage, has  nothing  to  support  it.  That  is  sometimes  done  in  order 
to  give  effect  to  an  instrument  in  which  repugnant  words  are  used, 
but  is  never  applied  for  the  purpose  of  defeating  an  instrument. 

8.     Contract  to  be  Construed  Reasonably. 

Gillet  V.  Bank  of  America.  i6o  N.  Y.  5^9. 

Gillet's  assignors,  Dan  Talmage's  sons,  were  customers  of 
the  defendant  bank.  They  procured  from  the  bank  a  loan  of 
$35,000,  giving  a  note  and  collateral  security  which  they  agreed 
the  bank  might  apply  upon  any  liabilities  due  or  to  become  due 
to  it  from  them.  Subsequently  the  bank  purchased  a  dishonored 
note  made  by  Talmage's  sons  and  seeks  to  apply  the  collateral 
to  the  payment  of  this  note. 

Held,  that  a  contract  is  to  be  construed  reasonably  rather  than 
unreasonably. 

Martin,  J. 

The  question  in  this  case  is  whether,  under  any  proper  con- 
struction of  the  contract,  the  defendant  was  authorized  to  retain 
the  property  pledged  until  the  $5,000  note  was  paid. 

The  respondent's  contention  is  that  this  agreement  and  note 
authorized  the  defendant  to  hold  the  property  pledged,  not  only 
as  security  for  the  sum  loaned  and  such  other  liabilities  as  were 
contracted  or  existed  between  them  as  bank  and  customer,  but  also 
for  any  and  all  claims  against  the  plaintiff's  assignors  which  it 
might  purchase,  regardless  of  their  character,  so  long  as  they  were 
liabilities  of  the  assignors  and  owned  by  the  defendant.  It  further 
claims  that  under  the  contract  it  could  have  transferred  the  note  and 
collateral,  and  that  thereupon  the  transferee  would  be  entitled  to 
retain  and  sell  the  property  pledged,  or  in  its  possession  for  safe- 
keeping or  otherwise,  not  only  for  the  payment  of  the  liabilities  of 
the  assignors  to  the  defendant,  but  also  for  the  payment  of  all 
and  any  claims  or  liabilities  of  theirs  held  by  the  transferee.  If 
these  contentions  are  to  be  sustained,  it  must  be  because  they  are 
plainly  stated  in  the  contract  or  necessarily  implied  from  its  ex- 
press provisions.  Such  unusual  and  almost  unlimited  power  over 
the  property  of  another  is  not  to  be  implied  or  inferred  from  doubtful 
or  uncertain  language. 

If  there  is  any  uncertainty  or  ambiguity  as  to  the  meaning  of 
the  agreement,  it  should  be   resolved  in   favor  of  the  plaintiff,   as 


2IO  COMMERCIAL    LAW    CASES 

it  was  the  defendant  who  prepared  this  contract.  If  there  is  any 
doubt  as  to  the  meaning  of  the  terms  employed,  the  defendant  is 
responsible  for  it  as  the  language  is  wholly  its  own.  We  think  the 
principle  controlling  as  to  the  construction  of  insurance  policies 
and  other  similar  instruments  is  applicable  to  this  agreement,  and 
that  it  should  be  liberally  construed  in  favor  of  the  plaintiff.  If 
the  language  can,  without  violence,  be  interpreted  to  include  only 
such  liabilities  to  the  defendant  as  resulted  from  transactions  be- 
tween the  plaintiff's  assignors  as  customers  and  the  defendant  as 
a  bank,  or  their  liabilities  which  came  into  its  hands  in  the  ordi- 
nary course  of  its  banking  business,  it  should  be  adopted. 

The  reason  of  the  rule  that  the  language  of  an  instrument  is 
to  be  construed  against  the  person  who  proposes  it  rather  than  against 
the  person  who  is  invited  to  accept  it,  is  that  men  are  supposed  to 
take  care  of  themselves,  and  that  he  who  chooses  the  words  by 
which  a  right  is  given  ought  to  be  held  to  the  strict  interpretation 
of  them,  rather  than  he  who  only  accepts  them.  Where  a  doubt 
exists  as  to  the  meaning  of  words,  resort  may  be  had  to  the  sur- 
rounding facts  and  circumstances  to  determine  the  meaning  in- 
tended. If  the  language  of  a  promise  may  be  understood  in  more 
senses  than  one,  it  is  to  be  interpreted  in  the  sense  in  which  the 
promisor  had  reason  to  believe  it  was  understood. 

In  the  construction  of  written  contracts  it  is  the  duty  of  the 
court,  as  near  as  may  be,  to  place  itself  in  the  situation  of  the 
parties,  and  from  a  consideration  of  the  surrounding  circumstances, 
the  occasion  and  apparent  object  of  the  parties,  to  determine  the 
meaning  and  intent  of  the  language  employed.  Indeed,  the  great 
object,  and  practically  the  only  foundation  of  rules  for  the  con- 
struction of  contracts  is  to  arrive  at  the  intention  of  the  parties. 
This  is  a  most  conspicuous  and  far-reaching  rule,  and  involves  the 
nature  of  the  instrument,  the  condition  of  the  parties  and  the  objects 
which  they  had  in  view,  and  when  the  intent  is  thus  ascertained,  it 
is  to  be  effectuated  unless  forbidden  by  law.  "Contracts  are  not  to 
be  interpreted  by  giving  a  strict  and  rigid  meaning  to  general  words 
or  expressions  without  regard  to  the  surrounding  circumstances  or 
the  apparent  purpose  which  the  parties  sought  to  accomplish." 

Where  there  is  uncertainty  or  doubt  as  to  the  meaning  of  words 
or  phrases  used  in  a  contract,  in  seeking  for  the  intent  of  the  par- 
ties as  evidenced  by  the  words  used,  the  fact  that  a  construction 
contended  for  would  make  the  contract  unreasonable  and  place  one  of 
the  parties  at  the  mercy  of  the  other,  may  properly  be  taken  into 
consideration. 

The  liabilities  to  the  bank,  which  were  contemplated  by  the 
parties,  were  those  which  arose  out  of  transactions  between  them,  and 
not  through  a  title  to  which  the  bank  succeeded  by  purchase  or 
assignment. 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  211 

g.     Contracts  to  be  Construed  According  to  the  Construction 
Placed  Upon  Them  by  the  Parties. 

Topliff  V.  Topliff.  122  U.  S.  121. 

Isaac  Topliff,  the  owner  of  a  patent,  contracted  with  John 
Topliff  that  John  Topliff  should  have  the  right  to  sell  certain 
patented  articles  and  that  any  improvement  by  either  party  should 
be  for  the  benefit  of  both.  John  Topliff  subsequently  secured  a 
new  patent  for  an  improvement  and  now  contends  that  Isaac 
Topliff  is  not  entitled  to  use  it.  on  the  ground  that  the  right  of 
each  party  to  the  benefit  of  improvements  related  only  to  improve- 
ments in  the  particular  type  first  patented,  although  the  parties 
had  acted  upon  the  contrary  assumption. 

Held,  that  contracts  are  to  be  construed  in  accordance  with  the 
construction  placed  upon  them  by  the  parties. 

Matthews,  J . 

The  subject  of  the  contract  is  the  manufacture  and  sale  of 
bows  and  bow-sockets  for  carriage  and  buggy  tops,  in  which  the  par- 
ties were  to  have  mutual  interests,  as  defined  in  the  contract.  It 
was  supposed,  and  this  undoubtedly  was  the  original  basis  of  the 
agreement,  that  the  appellee  had  secured  the  exclusive  right  to  a 
valuable  improvement  in  the  manufacture  of  this  description  of 
articles.  His  application  for  the  patent  was  then  pending;  the  patent 
was  in  fact  subsequently  issued.  In  the  meantime  the  article  as 
proposed  was  manufactured  and  put  on  sale,  and  ascertained  by 
experience  not  sufficiently  to  answer  the  purpose.  By  mutual  sug- 
gestion and  assent  improvements  in  the  manufacture  were  adopted, 
and  some  of  them  embraced  in  the  second  patent  to  the  appellee  of 
May  16,  1871.  The  article  made  under  that  patent  was  treated  as 
the  article  intended  by  the  contract.  Other  improvements  were  sub- 
sequently devised  and  adopted  for  perfecting  the  same  article,  and 
these  were  embraced  in  the  patent  to  John  A.  Topliff  of  August  24, 
1875.  The  operations  of  the  parties  in  the  manufacture  and  sale  of 
the  article  were  carried  on,  and  continued  to  enlarge  and  prosper, 
and  became  profitable ;  and  the  parties  throughout  acted  upon  the 
assumption  and  understanding  that  the  article  thus  manufactured  was 
the  article  contemplated  by  the  contract  between  them.  If  there 
were  any  doubt  or  ambiguity  arising  upon  the  words  employed  in 
the  clause  of  the  contract  under  consideration,  they  would  be  ef- 
fectually removed  by  this  practical  construction  continuously  put 
upon  them  by  the  conduct  of  the  parties  for  so  long  a  period. 

"In  cases  where  the  language  used  by  the  parties  to  the  contract 
is  indefinite  or  ambiguous,  and  hence  of  doubtful  construction,  the 
practical  interpretation  of  the  parties  themselves  is  entitled  to  great, 
if  not  controlling,  influence.     The  interest  of  each  generally  leads 


212  COMMERCIAL    LAW    CASES 

him  to  a  construction  most  favorable  to  himself,  and  when  the 
difference  has  become  serious  and  beyond  amicable  adjustment,  it 
can  be  settled  only  by  the  arl^itrament  of  the  law.  But  in  an  executory 
contract,  and  where  its  execution  necessarily  involves  a  practical  con- 
struction, if  the  minds  of  both  parties  concur,  there  can  be  no  great 
danger  in  the  adoption  of  it  by  the  courts  as  the  true  one." 

10.     Inconsistent  Written  and  Printed  Provisions. 

Hagan  v.  Scottish  Insurance  Company.  i86  U.  S.  42^. 

Hagan  insured  a  tug  boat  with  the  defendant  insurance  com- 
pany, the  printed  policy  running  by  a  written  insert  to  "Peter 
Hagan  &  Company  for  account  of  whom  it  may  concern."  Hagan 
then  sold  one-half  interest  in  the  boat  to  the  other  plaintiff,  Martin. 
Upon  destruction  of  the  tug,  the  insurance  company  claims  that 
it  is  not  liable  to  Martin  on  accotmt  of  a  printed  provision  that 
no  change  should  take  place  in  the  title  of  the  insured. 

Held,  that  when  there  is  a  conflict  betw'een  written  and  printed 
provisions  in  a  contract,  the  written  provisions  prevail. 

Peckham,  J . 

Where  a  marine  policy  is  thus  taken  out  upon  a  blank  policy 
providing  by  many  of  its  terms  for  insurance  on  property  or  goods 
on  land,  it  becomes  doubly  important  to  keep,  and  apply  with  strict- 
ness, the  rule  that  the  written  shall  prevail  over  the  printed  por- 
tion of  a  policy,  as  in  such  case  the  written,  even  more  clearly 
than  usual,  will  evidence  the  real  contract  between  the  parties. 
Courts  will  not  endeavor  to  limit  what  would  otherwise  be  the  mean- 
ing and  effect  of  the  written  language  by  resorting  to  some  printed 
provision  in  the  policy,  which,  if  applied,  would  change  such  mean- 
ing and  render  the  written  portion  substantially  useless  and  without 
application. 

If  there  be  any  inconsistency  between  the  written  provision 
of  the  policy  and  the  printed  portions  thereof,  the  written  lan- 
guage must  prevail.  It  becomes  necessary,  therefore,  to  determine 
what  is  the  meaning  of  the  written  portion  of  the  policy,  and  what 
was  intended  by  the  parties  by  the  language  "on  account  of  whom 
it  may  concern." 

We  concur  in  the  view  that  by  virtue  of  the  language  contained 
in  the  policy,  "on  account  of  whom  it  may  concern,"  it  is  not  nec- 
essary that  the  person  who  takes  out  such  a  policy  should  have  at 
that  time  any  specific  individual  in  mind.  If  he  intended  the  policy 
should  cover  the  interest  of  any  person  to  whom  he  might  sell 
the  entire  or  any  part  of  the  interest  insured,  that  would  be  enough. 

In  this  case  there  is  no  question  of  receiving  parol  evidence 
to  alter  or  change  any  condition  in  the  policy.  It  is  simply  a  ques- 
tion of  construction  as  to  the  meaning  of  the  language  used  in  the 


OPERATION    AND-  DISCHARGE    OF    CONTRACTS  21 2 

policy,  and  as  to  the  intention  of  the  party  taking  it  out,  and  whetlier 
the  written  portion  (the  intention  of  the  party  being  so  stated) 
is  inconsistent  with  any  printed  portion  thereof;  and  if  so,  whether 
it  would  prevail  as  against  such  printed  portion.  We  think  the 
written  portion  is  inconsistent  with  the  printed  condition  as  to 
change  of  interest,  and  as  to  sole  ownership,  and  there  being  such 
inconsistency  the  written  portion  must  be  held  to  cover  the  assignee 
of  a  part  interest  in  the  tug,  as  intended  at  the  time  by  the  party 
taking  out  the  insurance. 

II.     Terms  Implied  in  a  Contract. 

Genet  V.  The  Delaware  and  Hudson  Canal  Co.   1^6  N.  Y.  §p^. 

The  Canal  Company  agreed  with  Mr.  and  Mrs.  Genet  to  oper- 
ate a  coal  mine  belonging  to  the  Genets  and  to  pay  a  certain  royalty 
upon  the  coal  mined,  specifying  a  minimum  amount  to  be  paid. 
The  Canal  Company  so  negligently  mined  the  coal  that  it  caused 
the  mine  to  cave  in,  rendering  it  thereby  totally  worthless.  The 
Genets  now  sue  on  an  implied  stipulation  against  such  negligent 
destruction. 

Held,  that  a  contemplated  term  of  the  contract  may  be  implied. 

Finch,  J. 

There  is  no  such  express  stipulation,  but  I  think  one  is  to  be 
implied,  and  fairly  and  justly  may  be  found  interwoven  with  the  terms 
expressed,  and  growing  out  of  their  scope  and  meaning.  Here,  the 
lessor,  beyond  her  minimum  royalty,  took  the  risk  of  the  defendant's 
capacity  and  necessities,  of  its  judgment  of  markets,  of  its  ability 
to  sell  and  find  customers  for  the  product,  of  the  demands  of  its  own 
interest  and  welfare ;  but  the  risk  she  did  not  take  was  that  the 
lessee  should  make  royalties  beyond  the  minimum  absolutely  impos- 
sible by  a  total  destruction  of  the  mine  out  of  which  the  royalties 
were  to  come,  and  that  through  the  agency  of  its  own  wilful  or 
negligent  act.  The  plaintiff  took  a  chance  undoubtedly;  but  she 
was  entitled  to  have  it  and  to  have  it  as  she  took  it ;  bad  enough  at 
the  best,  but  such  as  it  was,  hers ;  and  which  the  defendant  was  not 
at  liberty  wilfully  or  negligently  to  destroy. 

Implied  promises  are  to  be  cautiously  and  not  hastily  raised. 
They  always  exist  where  equity  and  justice  require  the  party  to  do 
or  to  refrain  from  doing  the  thing  in  question ;  where  the  covenant 
on  one  side  involves  some  corresponding  obligation  on  riie  other; 
where  by  the  relations  of  the  parties  and  the  subject-matter  of  the 
contract  a  duty  is  owing  by  one  not  expressly  bound  by  the  contract 
to  the  other  party  in  reference  to  the  subject  of  it.  In  this  court 
we  have  thrown  some  safeguards  about  the  doctrine  to  secure  its  pru- 
dent application,  and  have  said  that  a  promise  can  be  implied  only 
where  we  may  rightfully  assume  that  it  would  have  been  made  if 


214  COMMERCIAL    LAW    CASES 

attention  had  been  dravvn  to  it,  and  that  it  is  to  be  raised  only  to 
enforce  a  manifest  equity,  or  to  reach  a  result  which  the  unequivocal 
acts  of  the  parties  indicate  that  they  intended  to  effect. 

It  seems  to  me  that  within  the  rule  the  plaintiff  has  a  right 
of  action  upon  the  implied  promise  of  the  defendant  not  wilfully  or 
negligently  to  incapacitate  itself  from  taking  out  more  than  the 
minimum  quantity  of  coal, 

12.    Construction  of  Contracts  as  to  Time. 

Jones  V.  Newport  News  and  Mississippi  Valley  Co.  6^  fed. 
736. 

Jones  built  a  coal  trestle  leading  to  his  coal  business  upon  an 
agreement  with  the  defendant  railroad  that  it  would  maintain  the 
switch  running  to  it.  A  freight  train  belonging  to  the  railroad 
failed  to  take  the  switch  and  damaged  the  property  of  the  plaintiff. 
The  railroad  company  then  took  out  the  switch.  Jones  sues  for 
damages  for  the  taking  out  of  the  switch,  no  time  having  been 
specified  as  to  the  duration  of  the  contract.  The  switch  had  in 
fact  been  maintained  for  some  eight  years. 

Held,  that  if  no  time  is  specified  in  the  contract,  it  will  be 
construed  to  imply  a  reasonable  time. 

Tajt,  Cir.  J. 

The  petition  makes  no  better  case  for  the  plaintiff  on  the  theory 
of  a  contract  than  on  a  common  law  liability.  It  is  not  alleged 
that  either  the  defendant  or  its  predecessor  agreed  to  keep  the  switch 
in  the  main  line  for  any  definite  time,  or  that  either  expressly  agreed 
to  keep  it  there  forever.  The  plaintiff  contends  that,  nothing  having 
been  said  as  to  the  time,  the  implication  is  that  the  switch  was  to  be 
maintained  at  all  times,  i.  e.,  forever.  Such  a  construction  is  quite 
at  variance  with  the  views  of  the  supreme  court,  in  [a]  case 
[in  which]  the  city  of  Marshall  filed  a  bill  in  equity  to  enforce  an 
agreement  with  [a]  railroad  company  under  which  it  had  given  the 
railroad  company  $300,000  in  county  bonds  and  66  acres  of  land 
in  the  city  limits,  and  the  company,  in  consideration  of  the  donation, 
agreed  "to  permanently  establish  its  eastern  terminus  and  Texas  office 
at  the  city  of  Marshall,  and  to  establish  and  construct  at  said  city 
the  main  machine  shops  and  car  works  of  said  railroad  company." 
It  was  held  that  the  contract  on  the  part  of  the  railroad  company  was 
satisfied  and  performed  when  the  company  had  established  and  kept 
a  depot  and  offices  at  Marshall,  and  set  in  operation  said  car  works 
and  machine  shops  there,  and  kept  thcni  going  for  eight  years,  and 
until  the  interests  of  the  railway  company  and  the  public  demanded 
a  removal  of  all  or  part  of  these  subjects  of  the  contract  to  some  other 
j)lace;  that  the  word  "permanent."  in  the  contract,  was  to  be  con- 
strued  with   reference   to   the   subject-matter   of   the   contract,   and. 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  21 5 

under  the  circumstances  of  the  case,  it  was  complied  with  by  the 
establishment  of  the  shops,  with  no  intention  at  the  time  of  remov- 
ing or  abandoning  them;  that  if  the  contract  were  to  be  interpreted 
as  one  to  maintain  forever  the  eastern  terminus  and  the  shops  and 
Texas  office  at  Marshall,  without  regard  to  the  convenience  of  the 
public,  it  would  become  a  contract  that  could  not  be  enforced  in 
equity. 

[The  contract]  "did  not  amount  to  a  covenant  that  the  company 
would  never  cease  to  make  its  eastern  terminus  at  Marshall ;  that  it 
would  forever  keep  up  the  depot  at  that  place ;  that  it  would  for  all 
time  continue  to  have  its  machine  shops  and  car  shops  there ;  and  that, 
whatever  might  be  the  changes  of  time  and  circumstances  of  railroad 
rivalry  and  assistance,  these  things  alone  should  remain  forever 
unchangeable.  Such  a  contract,  while  we  do  not  say  that  it  would 
be  void  on  the  ground  of  public  policy,  is  undoubtedly  so  far  ob- 
jectionable as  obstructing  improvements  and  changes  which  might 
be  for  the  public  interest,  and  is  so  far  a  hindrance  in  the  way 
of  what  might  be  necessary  for  the  advantage  of  the  railroad  itself, 
and  of  the  community  which  enjoyed  its  benefits,  that  we  must  look 
the  whole  contract  over  critically  before  we  decide  that  it  bears 
such  an  imperative  and  such  a  remarkable  meaning." 

In  the  light  of  this  construction  of  an  express  agreement  to 
locate  and  maintain  a  depot  permanently  at  a  town  on  the  line  of 
a  railroad,  it  would  seem  clear  that  we  should  not  imply  in  a 
contract  for  a  private  switch  connection  a  term  that  it  shall  be 
perpetual,  and  thus  forever  limit  the  discretion  of  the  directors  to 
deal  with  a  subject  which  may  seriously  affect  the  convenience  or 
safety  of  the  public  in  its  use  of  the  road. 

13.     When  Time  is  the  Essence  of  the  Contract. 

Beck  &  Pauli  Lithographing  Co.  v.  Colorado  Milling  and  Ele- 
vator Co.   ^2  Fed.  yoo. 

The  Lithographing  Company  agreed  to  furnish  to  the  MilHng 
Company  certain  hthographs  to  be  specially  manufactured  upon 
its  order,  and  to  be  delivered  before  January  i,  1890.  They  did 
not  deliver  until  shortly  after  that  date,  but  now  sue  for  the  price. 

Held,  that  in  contracts  for  work  or  skill,  time  is  not  construed 
to  be  of  the  essence  of  the  contract. 

Sanborn,  Cir.  J. 

It  is  a  general  principle  governing  the  construction  of  con- 
tracts that  stipulations  as  to  the  time  of  their  performance  are 
not  necessarily  of  their  essence,  unless  it  clearly  appears  in  the 
given  case  from  the  express  stipulations  of  the  contract  or  the 
nature  of  its  subject-matter  that  the  parties  intended  performance 
within  the  time   fixed  in  the   contract  to  be  a  condition  precedent 


2l6  COMMERCIAL    LAW    CASES 

to  its  enforcement,  and,  where  the  intention  of  the  parties  does 
not  so  appear,  performance  shortly  after  the  time  limited  on  the 
part  of  either  party  will  not  justify  a  refusal  to  perform  by  the 
party  aggrieved,  but  his  only  remedy  will  be  an  action  or  counter- 
claim for  the  damages  he  has  sustained  from  the  breach  of  the  stip- 
ulations. In  the  application  of  this  principle  to  the  cases  as  they 
have  arisen,  in  the  promulgation  of  the  rules  naturally  deduced 
from  it,  and  in  the  assigmnent  of  the  various  cases  to  the  re- 
spective classes  in  which  the  stipulation  as  to  time  of  perform- 
ance is,  or  is  not,  deemed  of  the  essence  of  the  contract,  the  con- 
trolling consideration  has  been,  and  ought  to  be,  to  so  decide  and 
classify  the  cases  that  unjust  penalties  may  not  be  inflicted,  nor 
unreasonable  damages  recovered.  Thus,  in  the  ordinary  contract  of 
merchants  for  the  sale  and  delivery,  or  the  manufacture  and  sale, 
of  marketable  commodities  within  a  time  certain,  it  has  been  held 
that  performance  within  the  time  is  a  condition  precedent  to  the 
enforcement  of  the  contract,  and  that  a  failure  in  this  regard  would 
justify  the  aggrieved  party  in  refusing  performance  at  a  later  day. 
This  application  of  the  general  principle  commends  itself  as  just 
and  reasonable,  on  account  of  the  frequent  and  rapid  interchange 
and  use  of  such  commodities  made  necessary  by  the  demands  of  com- 
merce, and  because  such  goods,  if  not  received  in  time  by  the  vendee, 
may  usually  be  sold  to  others  by  the  vendor  at  small  loss,  and  thus 
he  may  himself  measure  the  damages  he  ought  to  suffer  from  his  delay 
by  the  difference  in  the  market  value  of  his  goods.  On  the  other 
hand,  it  has  been  held  that  an  express  stipulation  in  a  contract 
for  the  construction  of  a  house,  that  it  should  be  completed  on  a 
day  certain,  and  that,  in  case  of  failure  to  complete  it  within  the 
time  limited,  the  builder  would  forfeit  $i,ooo,  would  not  justify 
the  owner  of  the  land  on  which  the  house  was  constructed  in 
refusing  to  accept  it  for  a  breach  of  this  stipulation  when  the 
house  was  completed  shortly  after  the  time  fixed,  nor  even  in  re- 
taining the  penalty  stipulated  in  the  contract,  but  that  he  must 
perform  his  part  of  the  contract,  and  that  he  could  retain  from  or 
recover  of  the  builder  the  damages  he  sustained  by  the  delay  and 
those  only.  This  application  of  the  general  rule  is  equally  just  and 
reasonable.  The  lumber  and  material  bestowed  on  a  house  by  a 
builder  become  of  little  comparative  value  to  him,  while  they  are 
ordinarily  of  much  greater  value  to  the  owner  of  the  land  on  which 
it  stands,  and  to  permit  the  latter  to  escape  payment  because  his 
house  is  completed  a  few  days  later  than  the  contract  requires  would 
result  in  great  injustice  to  the  contractor,  while  the  rule  adopted 
fully  protects  the  owner,  and  does  no  injustice  to  any  one.  The 
cases  just  referred  to  illustrate  two  well-settled  rules  of  law  which 
have  been  deduced  from  this  general  principle,  and  in  accordance 
with   which  this  case  must  be  determined.     They  are : 

In  contracts  of  merchants  for  the  sale  and  delivery  or  for 
the  manufacture  and  sale  of  marketable  commodities  a  statement 
descriptive   of   the   subject-matter,   or   some   material   incident,   such 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  21J 

as  the  time  of  shipment,  is  ^  condition  precedent,  upon  the  failure 
or  nonperformance  of  which  the  party  aggrieved  may  repudiate  the 
whole  contract.  But  in  contracts  for  work  or  skill,  and  the  mate- 
rials upon  which  it  is  to  be  bestowed,  a  statement  fixing  the  time  of 
performance  of  the  contract  is  not  ordinarily  of  its  essence,  and  a 
failure  to  perform  within  the  time  stipulated,  followed  by  a  substan- 
tial performance  after  a  short  delay,  will  not  justify  the  aggrieved 
party  in  repudiating  the  entire  contract,  but  will  simply  give  him  his 
action  for  damages  for  the  breach  of  the  stipulation. 

It  only  remains  to  determine  whether  the  contracts  in  the  case 
at  bar  are  the  ordinary  contracts  of  merchants  for  the  manufacture 
and  sale  of  marketable  commodities  or  contracts  for  labor,  skill, 
and  materials,  and  this  is  not  a  difficult  task.  A  contract  to  manu- 
facture and  furnish  articles  for  the  especial,  exclusive,  and  peculiar 
use  of  another,  with  special  features  which  he  requires,  and  which 
render  them  of  value  to  him,  but  useless  and  unsalable  to  others, — 
articles  whose  chief  cost  and  value  are  derived  from  the  labor  and 
skill  bestowed  upon  them,  and  not  from  the  materials  of  which  they 
are  made, — is  a  contract  for  work  and  labor,  and  not  a  contract 
of  sale. 

14.     Time  as  the  Essence  of  the  Contract  in  Equity. 

Carter  v.  Phillips.    144  Mass.    100. 

Carter  and  Phillips  entered  upon  a  j'oint  enterprise  for  the 
manufacture  and  sale  of  cloaks,  under  an  agreement  whereby 
either  party  might  terminate  the  contract  on  sixty  days'  notice.  It 
was  further  agreed  that  if  Phillips  should  so  give  notice,  Carter 
might  buy  the  business  for  a  certain  price  within  the  time  of  the 
notice.  Carter  informed  Phillips  of  his  desire  to  exercise  this 
option,  upon  notice  by  Phillips,  but  did  not  offer  to  perform 
within  the  sixty  days.  He  insists,  however,  that  in  equity  time 
is  not  the  essence  of  the  contract,  and  that  he  may  enforce  his  right 
within  a  reasonable  time. 

Held,  that  although  time  is  not  so  strictly  construed  as  the 
essence  of  the  contract  in  equity  as  at  law,  nevertheless,  if  the 
parties  agree  in  a  specific  case  that  time  shall  be  of  the  essence, 
it  is  so  held. 

Morton,  C.  J. 

The  contract  provided  that  he  should  have  the  privilege  of 
purchasing  within  sixty  days  after  the  notice  by  the  defendant. 
As  he  did  not  offer,  and  was  not  able  and  ready  to  perform  his 
part  of  the  contract,  he  cannot  insist  upon  a  performance  by  the 
defendant  if  the  rights  of  the  parties  are  governed  by  their  contract. 

But  the  plaintiff  contends  that  time  is  not  of  the  essence  of 
the  contract;  and  that,  in  equity,  he  ought  to  be  permitted  to  per- 


2l8  COMMERCIAL   LAW    CASES 

form  his  part  of  the  contract  within  a  reasonable  time  after  the 
expiration  of  the  sixty  days.  The  equitable  doctrine  to  which  the 
plaintiff  appeals  has  been  recognized  and  acted  upon  in  many  cases 
in  this  court.  [It]  was  formerly  carried  to  an  unreasonable  extent, 
but  in  modern  times  it  has  been  more  guardedly  applied;  "and  it  is 
now  held  that  time,  although  not  ordinarily  of  the  essence  of  a 
contract  in  equity,  yet  may  be  made  so  by  clear  manifestation  of 
the  intent  of  the  parties  in  the  contract  itself,  by  subsequent  no- 
tice from  one  party  to  the  other,  by  laches  in  the  party  seeking  to 
enforce  it,  or  by  change  in  the  value  of  the  land,  or  other  circum- 
stances which  would  make  a  decree  for  the  specific  performance 
inequitable." 

In  Goldsmith  v.  Guild,  lo  Allen  239,  where  the  plaintiff  agreed 
to  pay  for  land  "within  ten  days"  from  the  date  of  the  contract,  it 
was  held  that  time  was  of  the  essence  of  the  contract,  as  the  land 
was  fluctuating  in  value  from  day  to  day.  Mr.  Justice  Chapman  says 
in  the  opinion,  "But  this  doctrine  applies  to  sales  of  property  only 
in  cases  where  time  is  immaterial  to  the  value,  and  is  urged  only 
by  way  of  pretence  and  evasion,  and  does  not  apply  to  a  sale  of 
property  the  value  of  which  is  subject  to  daily  fluctuation."  In 
applying  this  doctrine  to  any  contract,  a  court  of  equity  seeks  to 
look  through  the  language  used  to  the  real  intentions  and  purposes 
of  the  parties ;  and  if  a  time  for  performance  is  stipulated  in  the 
contract,  and  it  appears  that  the  parties  intended  to  make  such 
time  an  essential  element  of  their  agreement,  the  court  will  carry 
it  into  effect.  To  do  otherwise  would  be  to  enforce  a  different 
contract  from  that  which  the  parties  made. 

In  the  case  before  us,  the  contract  carefully  stipulates  the  time 
of  the  notice  for  terminating  it. 


B.     Dependent  and  Independent  Terms. 

1.     In  General. 

Paine  V.  Broum.  57  A^.    Y.  228. 

Chamberlain,  assignor  of  the  plaintiff,  agreed  to  sell  Brown 
one-fifth  of  the  Central  canal  in  Indiana,  for  $10,000,  $2,000  to  be 
paid  in  July,  and  the  balance  in  one  and  two  years.  In  a  suit 
for  the  first  instalment.  Brown  contends  that  the  plaintiff  had  not 
offered  to  perform  and  therefore  cannot  recover. 

Held,  that  no  tender  of  performance  is  necessary  by  a  party 
who  sues  upon  an  independent  term  of  a  contract. 

Davies,  C.J. 

By   the   terms   of   this   contract.   Chamberlain,   the    assignor   of 
the  plaintiff,  bound  himself  to  sell  and  convey  by  deed  of  relea9e 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  219 

the  property  described  to  the  defendant  for  the  sum  of  ten  thousand 
dollars,  and  the  defendant  agreed  to  purchase  the  same  and  pay  that 
price  therefor.  No  time  was  fixed  by  the  contract  for  the  conveyance 
of  the  property,  but  the  defendant  was  to  pay  two  thousand  dollars 
of  the  purchase-money  in  the  month  of  July,  1859,  and  the  re- 
mainder in  one  and  two  years,  with  interest  from  May  i,   1859. 

This  case  is  not  unlike  that  of  Pordage  v.  Cole,  i  Saund.  319, 
and  is  clearly  within  the  doctrine  there  settled. 

Sergeant  Williams,  in  his  learned  note  to  this  case,  says :  "It 
is  to  be  observed  that  covenants  are  to  be  construed  to  be  either 
dependent  or  independent  of  each  other  according  to  the  intention 
and  meaning  of  the  parties  and  the  good  sense  of  the  case,  and  that, 
in  order  to  discover  that  intention,  and  learn  with  some  degree  of 
certainty  when  performance  is  necessary  to  be  averred  in  the  declara- 
tion and  when  not,  it  may  not  be  improper  to  lay  down  a  few  rules. 
First,  if  a  day  be  appointed  for  payment  of  money  or  part  of  it,  or 
for  doing  any  other  acts,  and  the  day  is  to  happen,  or  may  happen, 
before  the  thing  which  is  the  consideration  of  the  money  or  other 
act  is  to  be  performed,  an  action  may  be  brought  for  the  money,  or 
for  not  doing  such  other  act  before  performance,  for  it  appears 
that  the  party  relied  upon  his  remedy  and  did  not  intend  to  make 
the  performance  a  condition  precedent,  and  so  it  is  where  no  time 
is  fixed  for  the  performance  of  that  which  is  the  consideration  of 
the  money  or  other  act."  And  he  adds :  "This  seems  to  be  the 
ground  of  the  judgment  in  this  case,  the  money  being  appointed  to  be 
paid  on  a  fixed  day,  which  might  happen  before  the  lands  were  or 
could  be  conveyed.  But,  second,  when  a  day  is  appointed  for  the 
payment  of  money,  etc.,  and  the  day  is  to  happen  after  the  thing  which 
is  the  consideration  of  the  money,  etc.,  is  to  be  performed,  no  action 
can  be  maintained  for  the  money,  etc.,  before  performance.  Third, 
when  a  covenant  goes  only  to  a  part  of  the  consideration  on  both 
sides,  and  a  breach  of  such  covenant  may  be  paid  for  in  damages,  it 
is  an  independent  covenant,  and  an  action  may  be  maintained  for  a 
breach  of  the  covenant  on  the  part  of  the  defendant,  without  averring 
performance  in  the  declaration.  Fourth,  where  two  acts  are  to 
be  done  at  the  same  time,  as  where  A  covenants  to  convey  an  estate 
to  B  on  such  a  day,  and  in  consideration  thereof  B  covenants  to 
pay  A  a  sum  of  money  on  the  same  day,  neither  can  maintain  an 
action  without  showing  performance  of  or  an  offer  to  perform  his 
part,  though  it  is  not  certain  which  of  them  is  obliged  to  do  the 
first  act." 

The  principles  here  enunciated  have  received  the  approval  of 
the  courts  of  this  state. 

"Where  the  payments  are  to  precede  the  conveyance,  it  is  no 
excuse  for  nonpayment,  that  there  is  not  a  present  existing  capac- 
ity to  convey  a  good  title,  unless  fhe  one  whose  duty  it  is  to  pay, 
offers  to  do  so  on  receiving  a  good  title  and  then  it  must  be  made 
to  him  or  the  contract  will  be  rescinded." 

In  Grant  v.  Johnson,  i  Seld.  247,  the  question  was  whether  the 


220  COMMERCIAL   LAW    CASES 

plaintiff  could  sustain  an  action  for  the  second  instalment  of  the 
purchase-money  secured  by  the  agreement,  without  averring  and  prov- 
ing the  delivery  [of],  or  an  offer  to  deliver,  a  deed  of  the  premises. 
This  court  said:  "The  parties  have  declared  that  certain  payments 
were  to  be  made  and  certain  acts  performed  by  them  respectively  at 
the  times  specified  in  the  agreement.  They  must  be  held  to  have 
intended  the  performance  of  these  acts,  where  and  of  course  in  the 
order  of  time  indicated  in  their  covenants."  So,  in  the  case  at  bar, 
the  covenants  to  pay  the  purchase-money  in  the  instalments  men- 
tioned were  all  independent  of  and  intended  by  the  parties  to  pre- 
cede the  actual  conveyance  of  the  property  described.  The  covenant 
to  pay  the  $2,000  in  July,  1859,  was  independent  of  and  to  precede 
any  act  to  be  done  or  performed  by  the  assignor  of  the  plaintiff. 

2.     Entire  and  Severable  Contracts. 

Wooten  V.  Walters,  no  N.  C.  2^1. 

Wooten  orally  agreed  to  sell  Walters  two  stores  and  his  stock 
in  trade.  The  terms  of  price  adjustment  were  separately  indicated. 
Walters  took  possession  of  the  stores  and  goods.  Wooten  now 
seeks  to  recover  the  property. 

Held,  that  the  two  contracts  were  severable,  and  although  the 
contract  in  reference  to  the  stores  was  not  enforceable  because 
of  the  statute  of  frauds,  the  contract  for  the  sale  of  the  goods 
was  valid. 

Merrimon,  C.  J. 

A  contract  is  entire,  and  not  severable,  when  by  its  terms, 
nature  and  purpose  it  contemplates  and  intends  that  each  and  all 
of  its  parts,  material  provisions  and  the  consideration,  are  com- 
mon each  to  the  other  and  interdependent.  Such  a  contract  pos- 
sesses essential  oneness  in  all  material  respects.  The  considera- 
tion of  it  is  entire  on  both  sides.  Hence,  where  there  is  a  con- 
tract to  pay  a  gross  sum  of  money  for  a  certain  definite  considera- 
tion,* it  is  entire,  and  not  severable  or  apportionable  in  law  or 
equity.  Thus,  where  a  particular  thing  is  sold  for  a  definite  price, 
the  contract  is  an  entirety  and  the  purchaser  will  be  liable  for  the 
entire  sum  agreed  to  be  paid.  And  so  also,  when  two  or  more  things 
are  sold  together  for  a  gross  sum,  the  contract  is  not  severable. 
The  seller  is  bound  to  deliver  the  whole  of  the  things  sold,  and 
the  buyer  to  pay  the  whole  price,  in  the  absence  of  fraud.  Hence, 
it  has  been  held  that  where  a  cow  and  four  hundred  pounds  of  hay 
were  sold  for  seventeen  dollars  the  contract  was  entire.  "The  prin- 
ciple upon  which  this  rule  is  founded,  seems  to  be  that  as  the  con- 
tract is  founded  upon  a  consideration  dependent  upon  the  entire  per- 
formance thereof,  if  for  any  cause  it  be  not  wholly  performed  the 
casus  foederis  docs  not  arise,  and  the  law  will  not  make  provision 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  221 

for  exigencies  against  which  the  parties  have  neglected  to  fortify 
themselves."     Such  contracts  are  enforceable  only  as  a  whole. 

On  the  other  hand,  a  severable  contract  is  one  in  its  nature 
and  purpose  susceptible  of  division  and  apportionment,  having  two 
or  more  parts,  in  respect  to  matters  and  things  contemplated  and 
embraced  by  it,  not  necessarily  dependent  upon  each  other,  nor  is 
it  intended  by  the  parties  that  they  shall  be.  Hence,  an  action 
may  be  maintained  for  a  breach  of  it  in  one  respect  and  not  neces- 
sarily in  another,  or  for  several  breaches,  while  in  other  material 
respects  it  remains  intact.  In  such  a  contract  the  consideration  is 
not  single  and  entire  as  to  all  its  several  provisions  as  a  whole; 
until  it  is  performed  it  is  capable  of  division  and  apportionment. 
Thus,  though  a  number  of  things  be  bought  together  without  fixing 
an  entire  price  for  the  whole,  but  the  price  of  each  article  is  to 
be  ascertained  by  a  rate  or  measure  as  to  the  several  articles,  or 
when  the  things  [are]  of  different  kinds,  though  a  total  price  is 
named,  but  a  certain  price  is  affixed  to  each  thing,  the  contract  in 
such  cases  may  be  treated  as  a  separate  contract  for  each  article, 
although  they  all  be  included  in  one  instrument  of  conveyance,  or 
by  one  contract.  Thus  where  a  party  purchased  two  parcels  of 
real  estate,  the  one  for  a  specified  price  and  the  other  for  a  fixed 
price,  and  took  one  conveyance  of  both,  and  he  was  afterwards 
ejected  from  one  of  them  by  reason  of  defect  of  title,  it  was  held 
that  he  was  entitled  to  recover  therefor  from  the  vendor.  So 
also  it  was  held,  where  a  certain  farm  and  dead  stock  and  growing 
wheat  were  all  sold  together,  but  a  separate  price  was  affixed  to  each 
of  these  things,  that  the  contract  was  entire  as  to  each  item  and  was 
severable  into  three  contracts,  and  hence  a  failure  to  comply  with 
the  contract  as  to  one  item  did  not  invalidate  the  sale  and  give  the 
vendor  a  right  to  reject  the  whole  contract.  In  such  case  the  con- 
tract may  be  entire  or  severable,  according  to  the  circumstances  of 
each  particular  case,  and  the  criterion  is  to  be  found  in  the  question 
whether  the  whole  quantity-*-all  of  the  things  as  a  whole — is  of 
the  essence  of  the  contract.  If  it  appear  that  the  purpose  was  to 
take  the  whole  or  none,  then  the  contract  would  be  entire ;  other- 
wise, it  would  be  severable.  It  is  sometimes  difficult  to  determine 
whether  the  contract  is  entire  or  severable  in  such  cases,  and  there 
is  great  diversity  of  decisions  on  the  subject,  "but  on  the  whole,  the 
weight  of  opinion  and  the  more  reasonable  rule  would  seem  to  be 
that  where  there  is  a  purchase  of  different  articles  at  different 
prices  at  the  same  time,  the  contract  would  be  severable  as  to  each 
article,  unless  the  taking  of  the  whole  was  rendered  essential  either 
by  the  nature  of  the  subject-matter  or  by  the  act  of  the  parties." 
This  rule  makes  the  interpretation  of  the  contract  depend  on  the 
intention  of  the  parties  as  manifested  by  their  acts  and  the  circum- 
stances of  each  particular  case. 

Applying  the  rules  of  law  thus  stated  to  the  case  before  us, 

we   are  of  the  opniion  that  the  contract  to  be   interpreted,   treated 

\    as  executory,  is  severable  and  the  sale  of  the  goods  therein  men- 


222  COMMERCIAL    LAW    CASES 

tioned  was  not  necessarily  an  inseparable  part  of  the  land  embraced 
by  this  contract.  Although  it  is  single,  it  embraces  the  sale  of 
two  distinct  things,  each  havirig  a  certain  price  affixed  to  it,  and 
the  price  paid  for  the  whole  being  susceptible  of  apportionment. 
Neither  by  the  terms  of  the  contract  settled  by  the  findings  of 
fact,  nor  by  its  nature  and  purpose,  does  it  appear  that  the  store- 
house lot  of  land  and  stock  of  goods,  distinct  things,  were  both 
necessary  parts  of  an  entire  contract.  These  things  were  not  nec- 
essary parts  of  each  other ;  they  were  entirely  capable  of  being 
sold  separately.  Nor  does  it  appear  that  they  were  sold  as  a  single 
whole. 

3.     Instalment  Contracts. 

Norrington  v.   IVright.   115   U.  S.   188. 

Norrington  &  Company  agreed  to  ship  5,000  tons  of  rails  "from 
a  European  port  or  ports"  to  Wright  &  Sons,  at  the  rate  of  about 
1,000  tons  per  month,  the  entire  amount  to  be  shipped  before 
August  I,  1880.  They  shipped  400  tons  the  first  month,  885  the 
second  month,  1571  the  third  month  and  continued  to  deliver 
fluctuating  amounts  until  Wright  &  Sons,  upon  knowledge  of  the 
amounts  which  were  being  shipped,  refused  to  accept  further 
deliveries.     Norrington  &  Company  sue  on  the  contract. 

Held,  that  a  contract  for  the  shipment  of  a  quantity  of  goods 
by  a  definite  amoimt  per  month  is  not  a  divisible  contract  and  that 
a  failure  to  ship  the  required  amoimts  will  justify  rescission  of 
the  entire  contract. 

Gray,  J. 

In  the  contracts  of  merchants,  time  is  of  the  essence.  The  time 
of  shipment  is  the  usual  and  convenieait  means  of  fixing  the  prob- 
able time  of  arrival,  with  a  view  of  providing  funds  to  pay  for 
the  goods,  or  of  fulfilling  contracts  with  third  persons.  A  state- 
ment descriptive  of  the  subject-matter,  or  of  some  material  incident, 
such  as  the  time  or  place  of  shipment,  is  ordinarily  to  be  regarded 
as  a  warranty,  in  the  sense  in  which  that  term  is  used  in  insur- 
ance and  maritime  law,  that  is  to  say,  a  condition  precedent,  upon 
the  failure  or  nonperformance  of  which  the  party  aggrieved  may 
repudiate  the  whole  contract. 

The  contract  sued  on  is  a  single  contract  for  the  sale  and 
purchase  of  5,000  tons  of  iron  rails,  shipped  from  a  European  port 
or  ports  for  Philadelphia.  The  subsidiary  provisions  as  to  ship- 
ping in  different  months,  and  as  to  paying  for  each  shipment  upon 
its  delivery,  do  not  split  up  the  contract  into  as  many  contracts 
as  there  shall  be  shipments  or  deliveries  of  so  many  distinct  quanti- 
ties of   iron. 

The  cijntract   is  not  one   fur  the  sale  of  a  specific  lot  of  goods, 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  223 

identified  by  independent  circumstances,  such  as  all  those  deposited 
in  a  certain  warehouse,  or  to  be  shipped  in  a  particular  vessel,  or 
that  may  be  manufactured  by  the  seller,  or  may  be  required  for  use 
by  the  buyer,  in  a  certain  mill — in  which  case  the  mention  of  the 
quantity,  accompanied  by  the  qualification  of  "about,"  or  "more 
or  less,"  is  regarded  as  a  mere  estimate  of  the  probable  amount, 
as  to  which  good  faith  is  all  that  is  required  of  the  party  making  it. 
But  the  contract  before  us  comes  within  the  general  rule :  "When 
no  such  independent  circumstances  are  referred  to,  and  the  engage- 
ment is  to  furnish  goods  of  a  certain  quality  or  character  to  a 
certain  amount,  the  quantity  specified  is  material,  and  governs  the 
contract.  The  addition  of  the  qualifying  words  'about,'  'more  or  less,' 
and  the  like,  in  such  cases,  is  only  for  the  purpose  of  providing 
against  accidental  variations,  arising  from  slight  and  unimportant 
excesses  or  deficiencies  in  number,  measure  or  weight." 

The  plaintiff,  instead  of  shipping  about  1,000  tons  in  February 
and  about  1,000  tons  in  March,  as  stipulated  in  the  contract,  shipped 
only  400  tons  in  February,  and  885  tons  in  March.  His  failure 
to  fulfil  the  contract  on  his  part  in  respect  to  these  first  two  in- 
stalments justified  the  defendants  in  rescinding  the  whole  contract, 
provided  they  distinctly  and  seasonably  asserted  the  right  of  re- 
scission. 

The  plaintiff,  denying  the  defendants'  right  to  rescind,  and 
asserting  that  the  contract  was  still  in  force,  was  bound  to  show 
such  performance  on  his  part  as  entitled  him  to  demand  performance 
on  their  part,  and,  having  failed  to  do  so,  cannot  maintain  this  action. 

The  plaintiff  in  the  case  at  bar  greatly  relied  on  the  very 
recent  decision  of  the  House  of  Lords  in  Mersey  Co.  v.  Naylor, 
9  App.  Cas.  434. 

But  the  point  there  decided  was  that  the  failure  of  the  buyer 
to  pay  for  the  first  instalment  of  the  goods  upon  delivery  does  not, 
unless  the  circumstances  evince  an  intention  on  his  part  to  be  no 
longer  bound  by  the  contract,  entitle  the  seller  to  rescind  the  con- 
tract and  to  decline  to  make  further  deliveries  under  it.  And  the 
grounds  of  the  decision  are  applicable  only  to  the  case  of  a  failure 
of  the  buyer  to  pay  for,  and  not  to  that  of  a  failure  of  the  seller 
to  deliver,  the   first  instalment. 

The  Lord  Chancellor  said :  "The  contract  is  for  the  purchase  of 
5,000  tons  of  steel  blooms  of  the  company's  manufacture;  therefore 
it  is  one  contract  for  the  purchase  of  that  quantity  of  steel  blooms. 
No  doubt  there  are  subsidiary  terms  in  the  contract,  as  to  the  time 
of  delivery,  'Delivery  1,000  tons  monthly  commencing  January  next;' 
and  as  to  the  time  of  payment,  'Payment  nett  cash  within  three  days 
after  receipt  of  shipping  documents;'  but  that  does  not  split  up 
the  contract  into  as  many  contracts  as  there  shall  be  deliveries  for 
the  purpose,  of  so  many  distinct  quantities  of  iron.  It  is  quite 
consistent  with  the  natural  meaning  of  the  contract,  that  it  is  to 
be  one  contract  for  the  purchase  of  that  quantity  of  iron  to  be  de- 
livered at  those  times  and  in  that  manner,  and  for  which  payment  is 


224  COMMERCIAL    LAW    CASES 

SO  to  be  made.  It  is  perfectly  clear  that  no  particular  payment  can 
be  a  condition  precedent  of  the  entire  contract,  because  the  delivery 
under  the  contract  was  most  certainly  to  precede  payment ;  and  that 
being  so,  I  do  not  see  how,  without  express  words,  it  can  possibly 
be  made  a  condition  precedent  to  the  subsequent  fulfilment  of  the 
unfulfilled  part  of  the  contract,  by  the  delivery  of  the  undelivered 
steel." 

4.     Tender  of  Performance  as  a  Condition  Precedent. 

Loud  V.  Pomona  Land  and  Water  Co.  i^j  U.  S.  564. 

The  Pomona  Land  and  Water  Company  agreed  to  sell  prop- 
erty to  Loud  under  a  contract  whereby  he  was  to  pay  a  certain 
amount  at  the  time  of  the  making  of  the  contract  and  a  certain 
amount  on  other  specified  dates,  and  whereby  he  was  to  receive 
no  title  until  after  all  instalments  were  paid.  The  Land  Company 
sues  for  the  first  instalment ;  Loud  defends  on  the  groimd  that  the 
Company  did  not  tender  a  deed  as  a  condition  precedent  to  the 
recovery  of  the  instalment. 

Held,  that  the  tender  of  the  deed  was  not  a  condition  precedent 
to  the  recovery  of  the  instalment,  but  on  the  contrary  the  payment 
was  a  condition  precedent  to  the  right  to  a  deed. 

Jackson,  J. 

If  the  acts  to  be  performed  by  the  land  company  and  the  pur- 
chaser, respectively,  are  dependent  and  concurrent,  neither  party 
would  be  entitled  to  an  action  against  the  other  without  the  aver- 
ment of  performance,  or  the  tender  of  performance,  on  his  part. 
If,  however,  the  payment  of  the  purchase  price  for  the  lands  is  a 
condition  precedent  to  the  land  company's  covenant  to  convey,  then 
it  is  entitled  to  enforce  payment  without  conveyance  or  tender  of 
conveyance,  and  the  allegation  of  its  readiness  and  willingness  to 
convey,  upon  payment  of  the  purchase  money,  was  sufficient. 

The  question  whether  covenants  are  dependent  or  independent 
must  be  determined  in  each  case  upon  the  proper  construction  to 
be  placed  on  the  language  employed  by  the  parties  to  express  their 
agreement.  If  the  language  is  clear  and  unambiguous  it  must  be  taken 
according  to  its  plain  meaning  as  expressive  of  the  intention  of  the 
parties,  and  under  settled  principles  of  judicial  decision  should 
not  be  controlled  by  the  supposed  inconvenience  or  hardships  that 
may  follow  such  construction.  If  ])arties  think  proper,  they  may 
agree  that  the  right  of  one  to  maintain  an  action  against  another 
shall  [not]  be  conditional  or  dependent  upon  the  plaintiff's  performance 
of  covenants  entered  into  on  his  part.  On  the  other  hand,  they  may 
agree  that  the  performance  by  one  shall  be  a  condition  precedent  to 
the  performance  by  the  other.  The  question  in  each  case  is,  which 
intent  is  disclosed  l)y  the  language  employed  in  the  contract? 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  225 

A  subsequent  clause  of  the  contract  provides  that  "this  instru- 
ment is  not  and  shall  not  be  construed  as  a  conveyance,  equitable  or 
otherwise,  and  until  the  delivery  of  the  final  deed  of  conveyance, 
or  tender  of  all  payments  precedent  thereto,  the  party  of  the  second 
part,  his  heirs  or  assigns,  shall  have  no  title,  equitable  or  other- 
wise, to  said  premises,"  and  it  is  further  provided  that  time  is  of 
the  essence  of  the  contract. 

If  these  terms  and  provisions  of  the  contracts  are  to  be  under- 
stood in  their  plain  and  obvious  meaning,  they  clearly  express  the 
intention  of  the  parties  to  be  that  the  purchaser  shall  first  pay 
the  purchase  price  of  the  lands  contracted  for  before  he  is  entitled 
to  demand  a  conveyance  therefor.  It  is  also  clear  that  the  pur- 
chaser (the  defendant  below)  could  not  have  legally  demanded  from 
the  land  company  a  deed  or  conveyance  for  the  lands  until  after  the 
purchase  money  had  been  fully  paid.  The  payment  or  tender  of  pay- 
ment of  the  purchase  price  for  the  land  was  a  condition  precedent 
to  the  right  to  the  conveyance.  The  authorities,  both  in  England 
and  in  this  country,   fully  sustain  this  construction  of  the  contract. 

The  payment  of  all  the  instalments  of  purchase  money  is  a  con- 
dition precedent  to  the  performance  of  the  land  company's  covenant 
to  convey. 

5.     Time  of  Delivery  as  Condition  Precedent. 

Sunshine  Cloak  and  Suit  Co.  v.  Roqiiette  Bros,  jo  N.  Dak.  14^. 

The  Sunshine  Cloak  and  Suit  Company  sold  merchandise  to 
Roquette  Brothers,  agreeing  to  ship  for  the  fall  trade.  They 
did  not  ship  until  too  late  for  the  fall  trade  and  Roquette  Brothers 
refused  to  accept  the  goods.  The  Sunshine  Suit  Company  sues 
for  the  price. 

Held,  that  in  a  contract  of  sale,  delivery  within  the  time  speci- 
fied is  a  condition  precedent  to  liability  for  the  price. 

Christiansen,  J. 

Whether  one  promise  be  the  consideration  for  another,  or 
whether  the  performance,  and  not  the  mere  promise,  be  the  con- 
sideration, is  to  be  determined  by  the  intention  and  meaning  of 
the  parties,  as  collected  from  the  instrument,  and  the  application 
of  good  sense  and  right  reason  to  each  particular  case.  Where  an 
act  is  to  be  performed  by  the  plaintiff  before  the  accruing  of  the 
defendant's  liability  under  his  contract,  the  plaintiff  must  prove 
either  his  performance  of  such  condition  precedent,  or  an  offer  to 
perform  it  which  the  defendant  rejected,  or  his  readiness  to  ful- 
fil the  condition  until  the  defendant  discharged  him  from  so  doing, 
or  prevented  the  execution  of  the  matter  which  the  contract  re- 
quired him  to  perform. 

The  rule  in  such  cases  is  that  time  is  and  will  be  of  the  es- 


226  COMMERCIAL    LAW    CASES 

sence  of  the  contract,  so  long  as  the  contract  remains  executory, 
and  that  the  purchaser  will  not  be  bound  to  accept  and  pay  for  the 
goods,  if  they  are  not  delivered  or  tendered  on  the  day  specified 
in  the  contract. 

Cases  arise  where  either  party,  in  case  of  a  breach  of  the  con- 
tract, may  be  compensated  in  damages ;  and  in  such  cases  it  is  usually 
held  that  the  conditions  are  mutual  and  independent;  but  where  the 
conditions  are  dependent  and  of  the  essence  of  the  contract,  it  is 
everywhere  held  that  the  performance  of  one  depends  on  the  perform- 
ance of  another,  in  which  case  the  rule  is  universal  that,  until  the 
prior  condition  is  performed,  the  other  party  is  not  liable  to  an  action 
on  the  contract. 

Where  time  is  of  the  essence  of  the  contract,  there  can  be  no 
recovery  at  law  in  case  of  failure  to  perform  within  the  time  stip- 
ulated. 

"Conditions,"  says  Story,  "may  be  either  precedent  or  subse- 
quent, but  a  condition  precedent  is  one  which  must  happen  before 
either  party  becomes  bound  by  the  contract.  Thus,  if  a  person  agrees 
to  purchase  a  cargo  of  a  certain  ship  at  sea,  provided  the  cargo  proves 
to  be  of  a  particular  quality,  or  provided  the  ship  arrives  be- 
fore a  certain  time,  or  at  a  particular  port,  each  proviso  is  a 
condition  precedent  to  the  performance  of  such  a  contract;  and 
unless  the  cargo  proves  to  be  of  the  stipulated  quality,  or  the  ship 
arrives  within  the  agreed  time  or  at  the  specified  port,  no  contract 
can  possibly  arise." 

If  the  agreement  between  the  parties  was  to  the  efifect  that 
the  goods  were  to  be  shipped  by  August  15th,  then  it  was  incumbent 
upon  plaintiff  to  show  a  compliance  with  this  condition  in  order  to 
recover.  When  plaintiff  failed  to  comply  with  this  condition  defend- 
ants were  justified  in  treating  the  contract  as  terminated,  if  they  so 
desired.     No  duty  was  incumbent  upon  them  to  notify  plaintiff. 

6.     Effect  of  Failure  to  Perform  Condition  Precedent. 

Cutter  V.  Powell.  6   T.  R.   (Eng.)   ^20. 

A  seaman  took  a  note  for  his  services  on  a  voyage  from  Jamaica 
to  England,  agreeing  to  work  the  entire  voyage.  He  died  three 
weeks  before  the  ship  reached  England  and  his  widow  sues  for 
the  proportionate  part  of  his  wages. 

Held,  that  when  complete  performance  of  a  contract  is  a  condi- 
tion precedent,  partial  performance  will  not  warrant  compensation. 

Ashhurst,  J. 

We  cannot  collect  that  there  is  any  custom  prevailing  among 
merchants  on  these  contracts;  and  therefore  we  have  nothing  to 
guide  us  but  the  terms  of  the  contract  itself.  And  as  it  is  entire, 
and   as  the   defendant's  promise  depends  on  a   condition  precedent 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  22/ 

to  be  performed  by  the  other  party,  the  condition  must  be  per- 
formed before  the  other  party  is  entitled  to  receive  anytliing  under 
it.  It  has  been  argued  however  that  tlie  plaintiff  may  now  recover 
on  a  qiiantiun  meruit:  but  she  has  no  right  to  desert  the  agreement; 
for  wherever  there  is  an  express  contract,  the  parties  must  be  guided 
by  it;  and  one  party  cannot  relinquish  or  abide  by  it  as  it  may  suit 
his  advantage.  Here  the  intestate  was  by  the  terms  of  his  contract  to 
perform  a  given  duty  before  he  could  call  upon  the  defendant  to 
pay  him  anything;  it  was  a  condition  precedent,  without  perform- 
ing which  the  defendant  is  not  liable.  And  that  seems  to  me  to 
conclude  the  question :  the  intestate  did  not  perform  the  contract  on 
his  part;  he  was  not  indeed  to  blame  for  not  doing  it;  but  still  as 
this  was  a  condition  precedent,  and  as  he  did  not  perform  it,  his 
representative  is  not  entitled  to  recover. 

7.     Mutually  Dependent  Conditions. 

Diem  v.  Koblitc.  4p  Oh.  St.  41. 

Diem  sold  Koblitz  Brothers  a  quantity  of  paper  bags  on  thirty, 
sixty,  and  ninety  days'  credit.  After  shipment,  but  before  the 
credit  expired,  Diem  stopped  the  goods,  claiming  Koblitz  was 
insolvent,  and  sold  them  to  another  party.  Koblitz  sues  for  breach 
of  the  contract. 

Held,  that  in  a  sale  on  credit,  the  extension  of  credit  is  made  on 
condition  that  the  other  party  shall  keep  his  credit  good. 

Williams,  C.J. 

The  general  rule  is,  that  in  contracts  of  bargain  and  sale,  where 
there  is  no  agreement  for  credit,  the  promise  of  the  vendor  to  sell 
and  deliver  the  property,  and  that  of  the  purchaser  to  pay  the  con- 
tract price,  are  mutually  dependent,  and  neither  party  is  bound  to 
perform  without  contemporaneous  performance  by  the  other.  Pay- 
ment, or  tender  of  the  price,  is  the  condition  upon  which  the  pur- 
chaser can  require  delivery  of  the  property;  and  delivery  or  tender 
by  the  seller  is  just  as  essential  on  his  part  if  he  would  sue  for  the 
price,  or  for  damages  for  its  nonpayment.  If  both  parties  are 
unable  to  perform,  neither  can  maintain  on  action  against  the  other; 
and  therefore,  while  it  is  necessary  for  the  vendor,  if  he  would  sue, 
to  offer  performance  on  his  part,  he  is  in  a  position  to  defend,  without 
doing  so,  if  the  vendee  is  not  able  to  perform. 

When  the  sale  is  upon  credit,  it  is  one  of  the  implied  conditions 
of  the  contract  that  the  vendee  shall  keep  his  credit  good;  his  promise 
to  pay  at  a  future  day,  involving  an  engagement  on  his  part  that  he 
will  remain,  and  then  be,  able  to  pay;  which  engagement  is  broken 
when  he  becomes  insolvent,  and  unable  to  pay,  and  hence,  the 
right  of  the  vendor  to  then  stop  performance  of  the  contract  on 
his  part.     Nor  is  the  rule  varied  by  the  fact  that  the  vendee  has 


228  COMMERCIAL    LAW    CASES 

given  his  notes  or  bills,  or  other  securities  for  the  price,  payable 
at  the  end  of  the  time  for  which  the  credit  is  allowed.  The  vendor, 
in  such  case,  incurs  no  liability  by  not  delivering  the  property, 
unless  the  vendee  pay  or  tender  the  contract  price.  But  in  order  to 
sue  the  vendee,  he  should  offer  to  deliver  according  to  the  contract. 
"The  insolvency  of  the  vendee  in  a  contract  for  the  sale  and  future 
delivery  of  personal  property  in  instalments,  payment  to  be  made 
in  notes  of  the  vendee  as  each  instalment  is  delivered,  is  sufficient 
to  justify  the  vendor  for  refusing  to  continue  the  delivery,  unless 
payment  be  made  in  cash ;  but  it  does  not  absolve  him  from  offering  to 
deliver  the  property  in  performance  of  the  contract  if  he  intends  to 
hold  the  purchasing  party  to  it;  he  cannot  insist  upon  damages  for 
nonperformance  by  the  insolvent  without  showing  performance  on 
his  own  part,  or  an  offer  to  perform,  with  ability  to  make  the 
offer  good." 

The  rule  must  work  both  ways.  The  rights  and  obligations  of 
the  vendor  and  vendee  are  correlative.  If  the  insolvency  of  the 
vendee  is  sufficient  to  justify  the  vendor  in  refusing  to  deliver 
the  property,  unless  payment  be  made  in  cash,  it  follows  that  the 
vendor  incurs  no  liability  by  his  refusal,  and  therefore,  no  right 
of  action  accrues  to  the  vendee,  unless  payment  be  made  by  him. 
And  if  the  vendor  cannot  insist  upon  damages  for  the  vendee's  non- 
performance, without  showing  an  offer  on  his  part  with  the  ability 
to  perform,  so,  neither  can  the  vendee,  if  he  is  without  the  ability  to 
perform,  recover  from  the  vendor. 


8.     Conditions  Subsequent. 

Ray  V.  Thompson.   12  Cush.   (Mass.)  281. 

Ray  sold  Thompson  a  horse,  agreeing  that  he  would  take  the 
horse  back  within  a  specified  time  if  the  horse  was  not  satisfactory. 
Thompson  abused  and  injured  the  horse  so  that  he  was  of  less 
value  than  at  the  time  of  the  sale,  and  Ray  refused  to  take  him 
back.     Ray  sues  to  recover  the  price  of  the  horse. 

Held,  that  a  person  who  has  put  it  beyond  his  power  to  per- 
form a  condition  subsequent  cannot  avail  himself  of  it. 

The  Court: 

The  sale  was  on  a  condition  subsequent;  that  is,  on  the  condition 
he  did  not  elect  to  keep  the  horse,  to  return  him  within  the  time 
limited.  Being  on  a  condition  subsequent,  the  property  vested  pres- 
ently in  the  vendee,  defeasible  only  on  the  performance  of  the 
condition.  If  the  defendant,  in  the  meantime,  disabled  himself  from 
performing  the  condition, — and  if  the  horse  was  substantially  injured 
by  the  defendant  by  such  abuse,  he  would  be  so  disabled, — then  the 
sale  became  absolute,  the  obligation  to  pay  the  price  became  uncon- 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  229 

ditional,  and  the  plaintiff  might  declare  as  upon  an  indebitatus  as- 
sumpsit, without  setting  out  the  conditional  contract. 

9.     Conditions   Subsequent:   See  Cases  under  Discharge  by 
Agreement,  III,  A,  Infra. 


III. 
DISCHARGE  OF  CONTRACTS. 

Contracts  may  be  discharged  as  follows : 

1.  By  agreement.  This  form  of  discharge  includes  waiving, 
canceling,  and  rescinding  the  contract.  It  also  includes  a  sub- 
stituted contract  made  by  a  change  of  terms  or  a  change  of  parties. 
Substitution  may  arise  impliedly  or  expressly.  At  law,  a  sealed 
contract  may  ordinarily  be  discharged  by  executory  agreement  only 
if  the  agreement  be  under  seal,  but  an  agreement  not  under  seal, 
whether  written  or  oral,  may  be  discharged  orally.  In  some  juris- 
dictions, when  the  original  contract  is  within  the  statute  of  frauds, 
although  a  complete  discharge  may  be  oral,  any  substituted  agree- 
ment must  be  written.  This  fo  of  discharge  includes  that  by 
condition  subsequent,  which  takes  place : 

(i )  by  reason  of  the  nonfulfilment  of  a  specified  term  of  the 
contract, 

(2)  by  the  occurrence  of  a  particular  event,  or 

(3)  by  the  exercise  of  an  option. 

In  order  to  discharge  a  contract  by  agreement,  consideration  is 
necessary.  It  is  usually  found  in  the  mutual  promises  of  the 
parties  to  release  each  other  from  the  contract. 

2.  By  performance,  when  the  contract  has  been  executed  upon 
both  sides.  At  common  law,  a  strict  performance  of  the  terms 
of  a  contract  was  required.  At  the  present  time,  when  a  party 
has  slightly  deviated  from  the  terms  of  the  contract,  but  not  wil- 
fully, he  is  entitled  to  recover  the  contract  price,  subject  to  deduc- 
tion for  the  variation,  on  the  theory  of  substantial  performance ; 
or  he  is  entitled  to  recover  the  value  of  the  benefit  which  he  has 
conferred  upon  the  defendant  by  reason  of  his  work,  labor  and 
materials,  i.  e.,  upon  a  quantum  meruit.  Performance  may  be  by 
payment,  including  the  giving  of  a  negotiable  instrument.  In 
most  jurisdictions,  a  negotiable  instrument  is  held  to  be  accepted 
as  payment  conditionally  upon  its  payment  at  maturity.  In  others, 
it  is  assumed  to  be  a  complete  discharge  unless  a  contrary  intent 
appears.  Payment  on  account  must  be  applied  as  the  debtor 
directs.     If  he  gives  no  directions,  the  creditor  may  apply  it  to 


230  COMMERCIAL    LAW    CASES 

any  debt  which  he  chooses.  If  neither  makes  any  application,  the 
court  will  usually  apply  it  to  the  earliest  debt.  When  one  party 
tenders  performance  which  is  not  accepted  by  the  other,  the  party 
tendering  is  ordinarily  discharged  from  further  liability.  If, 
however,  the  tender  is  an  offer  to  pay  something  already  owing, 
the  party  tendering  is  not  discharged,  but  must  keep  the  tender 
good.  In  that  event,  the  effect  of  the  tender,  which  must  always 
conform  exactly  to  the  terms  of  the  contract,  is  merely  to  prevent 
the  running  of  interest  and  costs. 

3.  By  breach  of  the  obligation  which  the  contract  imposes. 
When  one  party  refuses  performance  to  which  the  other  is 
entitled,  a  breach  occurs.  It  may  be  brought  about  by  renuncia- 
tion made  by  one  party  before  the  time  of  performance  has  ar- 
rived. Renunciation  operates  to  discharge  the  contract  if  the 
other  party  so  elects.  If,  however,  he  brings  suit  for  damages 
before  the  time  of  performance  has  arrived,  there  is  a  conflict  as 
to  his  right  of  recovery.  By  the  general  rule,  upon  the  occur- 
rence of  such  an  anticipatory  breach,  the  party  injured  may  sue 
at  once  for  damages,  but  another  rule  requires  that  he  must  delay 
suit  until  such  time  as  he  is  entitled  to  performance.  In  all  juris- 
dictions, when  a  breach  occurs  during  the  time  when  a  party  is 
entitled  to  performance,  he  may  sue  for  future  as  well  as  past 
damages. 

4.  By  impossibility  of  performance,  when  that  impossibility 
is  created  by  law.  Impossibility  of  performance  arising  from  sub- 
sequent events  not  contemplated  by  the  parties  at  the  time  of  the 
making  of  the  contract  will  not  relieve  a  party  from  its  obliga- 
tion unless  those  events  operate  as  a  discharge  by  condition  subse- 
quent, express  or  implied,  contained  within  the  terms  of  the 
original  contract.  Discharge  by  destruction  of  the  subject  matter 
of  the  contract  is  an  example  of  this  latter  type  of  case,  although 
it  is  often  considered  a  discharge  by  impossibility. 

5.  By  operation  of  law.     Such  a  discharge  may  be  by: 

(i)  Merger.  Acceptance  of  a  higher  security  in  place  of  a 
lower,  merges  or  extinguishes  the  lower  security.  The 
two  securities  must  be  different,  the  object  identical,  and 
the  parties  the  same.  A  written  contract  is  not  a  higher 
security  than  an  oral  contract. 

(2)  Alteration.  Alteration  of  a  written  instrument  destroys 
the  contract  if  it  is  made  intentionally  by  one  party  with- 
f)ut  the  assent  of  the  other. 

(3)  Death.  Death  of  a  party  discharges  those  contracts  for 
the  fulfdment  of  which  the  personal  service  of  the  de- 
ceased is  necessary.  Otherwise  it  has  no  effect :  the 
executor,  administratf)r  or  heirs  succeed  to  the  rights 
and  liabilities  nf  the  original  contractor. 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  23 1 

(4)  Bankruptcy.  Bankruptcy  transfers  the  assets  of  the 
debtor  to  a  trustee,  who  thereupon  administers  the  bank- 
rupt estate.  Discharge  in  this  manner  may  also  be  a 
discharge  by  breach. 

A.     Discharge  by  Agreement. 

I.    Waiver. 

Collyer  v.  Moidton.  p  R.  I.  go. 

Collyer  &  Company  sue  to  recover  money  for  a  wire  bending 
machine  constructed  for  the  defendant  partners.  After  a  small 
part  of  the  work  of  construction  had  been  done,  the  plaintiffs' 
firm  dissolved ;  whereupon  the  defendant  Moulton  notified  them 
that  he  would  no  longer  be  responsible  for  the  machine.  He 
claims  that  the  plaintiffs  agreed  to  release  him  from  liability. 

Held,  that  a  contract  may  be  waived  by  mutual  consent,  so  far 
as  it  is  executory. 

Potter,  J. 

Where  two  parties  contract,  one  to  do  a  particular  piece  of 
work  and  the  other  to  pay  for  it,  the  latter  may  at  any  time  counter- 
mand the  completion  of  it,  and  in  such  case  the  former  cannot  go 
on  and  complete  the  work  and  claim  the  whole  price,  but  will  be 
entitled  only  to  pay  for  his  part  performance,  and  to  be  compensated 
for  his  loss  on  the  remainder  of  the  contract. 

As  [to]  the  manner  in  which  a  simple  contract  may  be  annulled, 
the  rule  is  that  so  long  and  so  far  as  the  contract  remains  executory 
and  before  breach,  it  may  be  annulled  by  agreement  of  all  parties ; 
but  that  when  it  has  been  broken  and  a  right  of  action  has  accrued, 
the  debt  or  damages  can  only  be  released  for  a  consideration;  and 
even  so  far  as  it  remains  executory,  it  may  be  said  that  the  agree- 
ment to  annul  on  one  side  may  be  taken  as  the  consideration  for  the 
agreement  to  annul  on  the  other  side. 

So  far,  therefore,  as  the  contract  in  the  present  case  remained 
unfinished  on  the  loth  February,  1865,  when  the  notice  was  given 
and  the  alleged  waiver  was  made,  we  may  consider  either  that  the 
contract  was  annulled  or  waived  by  consent,  in  which  case  (the 
machine,  so  far  as  completed,  being  tendered  or  delivered)  the  plain- 
tiffs could  claim  only  for  work  and  materials  to  that  date  without 
further  damages, — or  that  the  work  was  countermanded  by  the  de- 
fendant Moulton,  without  the  assent  of  the  plaintiffs,  in  which  case 
the  defendant  would  be  liable  for  the  part  performed  and  for  loss 
on  the  part  unperformed. 

We  consider  the  present  case  to  fall  under  the  first  head,  the 
notice  to,  and  declarations  and  conduct  of  the  plaintiffs  amounting 


22^2  COMMERCIAL    LAW    CASES 

to  a  waiver  of  the  fulfTlment  of  the  contract  as  first  made,  that  is, 
to  a  release  of  the  defendant  Moulton  for  the  part  still  unperformed. 

But  the  claim  for  payment  for  the  part  performed,  stands,  as 
we  have  seen,  on  a  different  ground.  Was  there  any  agreement  to 
release  Moulton  from  liability  for  this,  i.e.,  the  part  performed;  and 
if  so,  was  there  any  agreement  to  take  the  other  partner's  individ- 
ual promise  in  lieu  of  the  promise  of  the  firm,  or  anything  which 
would  amount  to  a  consideration  for  the  release  of  the  firm? 

If,  by  a  mutual  arrangement  between  the  plaintifif  Collyer  and 
the  two  defendants,  Moulton  had  been  released  from  his  liability 
for  the  work  already  done,  and  a  new  promise  made  by  Bromley, 
the  other  defendant,  to  pay  for  it,  this  would  have  been  a  valid 
release  for  a  valuable  consideration — one  debt  would  have  been 
substituted  for  the  other. 

But  we  cannot  find  sufficient  evidence  of  any  promise  on  the 
part  of  the  other  partner,  Bromley,  to  assume  the  liability;  and 
if  there  was  none,  then  the  release  of  liability  for  the  work  already 
done  was  without  consideration,  as  it  is  not  claimed  that  there  was 
any  other  consideration. 

2.     Substitution  of  New  Contract. 

Redding  v.   Vogt.   140  N.   C.  ^62. 

John  P.  Redding  and  his  wife  conveyed  two  tracts  of  land  to 
their  daughter,  Lizzie  C.  Redding,  who  agreed  to  give  one-half 
to  her  brother,  S.  A.  Redding.  Later,  Redding  and  his  wife  in- 
cluded the  same  property  in  another  deed  to  their  daughter,  this 
time  reserving  to  themselves  a  life  estate  in  the  entire  tract.  Lizzie 
C.  Redding  then  conveyed  one-half  to  her  brother,  reserving  the 
life  estate.  In  this  suit,  Lillian  Redding,  the  widow  of  S.  A. 
Redding,  seeks  to  enforce  her  rights  of  dower  on  the  ground  that 
her  husband  was  entitled  to  his  half  of  the  land  without  reserva- 
tion of  the  life  estate,  founding  her  claim  on  the  deed  first  given. 

Held,  that  when  two  contracts  are  made  concerning  the  same 
subject  matter,  the  first  will  be  considered  to  have  been  waived 
by  adoption  of  the  second. 

Walker,  J. 

That  parties  may  rescind  a  contract,  either  expressly  or  by 
substituting  another  in  its  place  which  is  so  inconsistent  with  it 
that  the  two  cannot  well  coexist  and  operate  at  one  and  the  same 
time,  cannot  be  doubted.  Rights  acquired  under  a  contract  may  be 
abandoned  or  relinquished  either  by  agreement,  or  by  conduct  clearly 
indicating  such  a  purpose.  A  contract  may  be  discharged  by  the 
substitution  of  a  new  contract,  and  this  results:  (1)  Where  a  new 
contract  is  expressly  substituted  for  the  old  one;  (2)  where  a  new 
contract  is  inconsistent  with  the  old  one;   (3)   where  new  terms  are 


"■      OPERATION    AND   DISCHARGE    OF    CONTRACTS  233 

agreed  upon,  in  which  case  a  new  contract  is  formed,  consisting  of  the 
new  terms  and  of  the  terms  of  the  old  contract  which  are  consistent 
with  them,  and  (4)  where  a  new  party  is  substituted  for  one  of  the 
original  parties  by  agreement  of  all  three.  Where  parties  make 
two  contracts  upon  the  same  subject  matter,  which  cannot  be  recon- 
ciled without  rejecting  some  of  the  material  stipulations  in  the  one 
or  the  other  or  both,  the  court  will  not  enter  upon  this  work  of 
expurgation,  but  will  endeavor  to  give  effect  to  the  one  contract  or 
the  other,  as  the  intention  of  the  parties  shall  seem  to  require. 
"When  the  parties  to  a  contract  come  to  a  fresh  agreement  of  such 
a  kind  that  the  two  cannot  stand  together,  the  effect  of  the  second 
agreement  is  to  rescind  the  first.  This  is  one  form  of  novation  in 
the  Roman  Law.  When  an  agreement  is  thus  rescinded  by  novation, 
the  contract  in  existence  prior  to  the  novation  loses  its  individuality, 
and  becomes  merged  in  the  new  contract.  Any  circumstances  or 
course  of  conduct  from  whence  can  be  clearly  deduced  an  agreement 
to  put  an  end  to  the  original  contract,  will  amount  to  a  rescission 
of  it."  When  the  provisions  of  two  contracts  are  inconsistent  and 
the  second  cannot  be  operative  if  the  first  is  still  in  existence,  the 
first  is  no  longer  a  subsisting  agreement.  If,  upon  the  facts  of  our 
case,  therefore,  we  can  gather  that  the  parties  intended  the  two  con- 
tracts not  to  coexist,  and  the  second  was  designed  to  take  the  place 
of  the  first,  the  former  must  be  taken  to  embody  the  entire  and 
final  agreement  of  the  parties. 

3.     Effect  of  Substitution  of  New  Contract. 

Adams  v.  Power.   48  Miss.  4^0. 

Power  and  Jones  gave  a  note  running  to  Carter  and  Cook 
for  a  one-fourth  interest  in  a  paper  called  the  Clarion,  which 
they  bought  from  Shannon,  a  debtor  of  Carter  and  Cook,  to  whom 
the  note  was  made  payable  at  Shannon's  request.  Without  the 
knowledge  of  Carter  and  Cook,  Shannon  agreed  that  they  would 
allow  the  note  to  be  satisfied  by  means  of  advertisements  to  be 
secured  by  Shannon.  Mrs.  Adams  sues  as  assignee  of  Carter 
and  Cook.  Power  and  Jones  attempt  to  show  in  defense  the 
collateral  contract  with  Shannon. 

Held,  that  when  the  note  was  made  to  the  payees,  a  novation 
resulted  by  substituting  them  for  Shannon  as  the  creditor  of  the 
defendants ;  and  that  they  and  their  assigns  are  not  bound  by  any 
collateral  agreement  with  Shannon. 

Peyton,  C.  J. 

In  the  civil  law  there  are  three  kinds  of  novation,  i.  Where 
the  debtor  and  creditor  remain  the  same,  bvit  a  new  debt  takes  the 
place  of  the  old  one.  2.  Where  the  debt  remains  the  same,  but  a 
new   debtor    is    substituted    for   the    old    one.      This    transaction    is 


234  COMMERCIAL    LAW    CASES 

called  delegation.  The  essential  distinction  between  delegation  and 
any  other  novation  [is]  that  the  former  demands  the  consent  of  all 
three  parties,  but  the  latter,  that  only  of  the  two  parties  to  the 
new  debt.  3.  Where  the  debt  remains  the  same,  but  a  new  creditor 
is  substituted  for  the  old  one.  This  is  also  called  delegation,  for 
the  reason  above  given,  to  wit:  that  all  three  parties  must  assent 
to   the   new   bargain. 

Delegation  is  the  change  of  one  debtor  for  another,  when  he 
who  is  indebted  substitutes  a  third  person  who  obligates  himself 
in  his  stead  to  the  creditor;  so  that  the  first  debtor  is  acquitted  and 
his  obligation  extinguished,  and  the  creditor  contents  himself  with 
the  obligation  of  the  second  debtor.  "Delegation  is  not  made  but  by 
the  consent  of  the  debtor  who  delegates  another  in  his  place,  of  the 
person  who  is  delegated,  and  of  the  creditor  who  accepts  the  dele- 
gation, and  who  contents  himself  with  the  new  debtor." 

The  common  law  doctrine  of  novation  mainly  agrees  with  that 
of  the  civil   law,  but   in  some   parts  differs   from  it.     "If   A.   owes 

B.  £100  and  B.  owes  C.  £100,  and  the  three  meet  and  it  is  agreed 
between  them  that  A.  shall  pay  to  C.  £100,  B.'s  debt  is  extinguished, 
and  C.  may  recover  that  sum  against  A." 

There  must  always  be  a  debt  once  existing,  and  now  canceled, 
to  serve  as  a  consideration  for  the  new  liability.  The  action  in  all 
cases  is  brought  on  the  new  agreement.  But  in  order  to  give  the 
right  of  action,  there  must  be  an  extinguishment  of  the  original 
debt.     A  good  novation  is  an  accord  executed. 

In  that  kind  of  novation,  called  in  the  civil  law  delegation, 
no  new  creditor  could  be  substituted  without  the  debtor's  consent. 
This  rule  is  observed  in  the  common  law.  Hence,  without  this  con- 
sent and  promise  to  pay,  a  new  creditor  can  have  no  action  against 
the  debtor,  because  there  is  no  privity  of  contract  between  them. 
To  establish  such  privity,  there  must  be  a  new  promise  founded  on 
sufficient  consideration.  And  the  extinction  of  the  prior  debt  is 
a  sufficient  consideration  in  such  case. 

When  assent  or  consideration  is  wanting,  the  novation  operates 
only  as  a  species  of  collateral  security.  This  assent  on  the  part 
of  the  debtor  is  said  to  be  essential,  for  the  reason  that  he  may 
have  an  account  with  his  assignor;  and  he  shall  not  be  barred  of 
his  right  to  a  set-off,  or  any  defense  he  may  have.  Still,  if  any- 
thing like  an  assent  on  his  part  can  be  inferred,  he  will  be  con- 
sidered as  the  debtor. 

If  A.  owes  B.,  and  B.  owes  C,  and  it  is  agreed  by  these  three 
parties  that  A.  shall  pay  this  debt  to  C,  and  A.  is  by  this  agreement 
discharged  from  his  debt  to  B.,  and  B.  is  also  discharged  from  his 
debt  to  C,  then  there  is  an  obligation  created  from  A.  to  C,  and 

C.  may  bring  an  action  against  A.  in  his  own  name.  This  would  be 
no  contradiction  or  exception  to  the  ancient  rule,  that  a  personal 
contract  cannot  be  assigned  so  as  to  give  the  assignee  a  right  of 
action  in  his  own  name.  It  is  the  case  of  a  new  contract  formed 
and  a  former  contract  dissolved;  and  the  general  principles  in  rela- 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  235 

tion  to  consideration  attach  to  the  whole  transaction.  Thus,  to  give 
the  transaction  its  full  legal  efficacy,  the  original  liabilities  must 
be  extinguished;  for,  if  the  debt  from  A.  to  B.  be  not  discharged  by 
A.'s  promise  to  pay  it  to  C,  then  there  is  no  consideration  for  this 
promise,  and  no  action  can  be  maintained  upon  it;  but,  if  this  liability 
be  discharged,  then  it  is  a  sufficient  consideration,  and  if,  at  the 
same  time,  C.  gives  up  his  claim  on  B.  as  the  ground  on  which  B. 
orders  A.  to  pay  C,  then  the  consideration  for  which  A.  promises 
to  pay  C.  may  be  considered  as  moving  from  C. 

An  important  rule  of  novation  is,  that  the  extinction  of  the 
debt  destroys  also  all  rights  and  liens  appertaining  thereto.  Hence, 
if  any  hypothecations  be  attached  to  the  old  contract,  they  will  be 
canceled  by  the  new  one,  unless  express  words  retain  them.  The 
second  contract  is  simple  and  independent,  and  upon  its  terms  the 
action  is  brought.  Hence,  too,  the  new  parties  cannot  avail  them- 
selves of  defenses,  claims  and  set-offs  which  would  have  prevailed 
between  the  old  parties.  This  necessarily  results  from  the  extinguish- 
ment of  the  old  liabilities  and  the  creation  of  the  new  relation  of 
debtor  and  creditor. 


4.     Discharge  by  Condition  Subsequent:  Occurrence  of  Par- 
ticular Event. 

Gray  v.  Gardner.  ly  Mass.   187, 

Gray  contracted  with  Gardner  and  others  to  sell  them  a  certain 
amount  of  sperm  oil.  The  parties  agreed  that  a  higher  price  should 
be  paid  if  the  supply  of  sperm  oil  brought  in  should  be  small.  To 
effectuate  this  intention  they  agreed  upon  a  fixed  price  per  gallon, 
and  further  agreed  upon  an  additional  payment  if  a  smaller  amount 
of  oil  should  arrive  at  certain  ports  between  the  first  day  of  April 
and  the  first  day  of  October  than  arrived  the  previous  year  during 
the  same  period.  The  price  turned  out  to  depend  upon  the  ques- 
tion whether  a  certain  ship  had  "arrived"  on  the  first  day  of 
October,  as  it  had  come  into  harbor  on  that  date,  but  had  not 
anchored  or  moored.  Gardner  contends  that  the  ship  had  "ar- 
rived," and  that  therefore  Gray  is  not  entitled  to  the  additional 
sum  sued  for. 

Held,  that  the  contract  to  pay  the  additional  sum  was  not  dis- 
charged by  the  occurrence  of  the  particular  event  which  should 
discharge  the  contract  by  the  operation  of  a  condition  subsequent. 

Parker,  C.  J. 

The  very  words  of  the  contract  show  that  there  was  a  promise 
to  pay,  which  was  to  be  defeated  by  the  happening  of  an  event,  viz., 
the  arrival  of  a  certain  quantity  of  oil  at  the  specified  places  in  a 
given  time.    It  is  like  a  bond  with  a  condition;  if  the  obligor  would 


236  COMMERCIAL    LAW    CASES 

avoid  the  bond,  he  must  show  performance  of  the  condition.  The 
defendants  in  this  case  promise  to  pay  a  certain  sum  of  money,  on 
condition  that  the  promise  shall  be  void  on  the  happening  of  an 
event.  It  is  plain  that  the  burden  of  proof  is  upon  them;  and  if 
they  fail  to  show  that  the  event  has  happened,  the  promise  remains 
good. 

The  other  point  is  equally  clear  for  the  plaintiff.  Oil  is  to 
arrive  at  a  given  place  before  twelve  o'clock  at  night.  A  vessel 
with  oil  heaves  in  sight,  but  she  does  not  come  to  anchor  before  the 
hour  is  gone.  In  no  sense  can  the  oil  be  said  to  have  arrived.  The 
vessel  is  coming  until  she  drops  anchor,  or  is  moored.  She  may  sink, 
or  take  fire,  and  never  arrive,  however  near  she  may  be  to  her  port. 
It  is  so  in  contracts  of  insurance ;  and  the  same  reason  applies  to 
a  case  of  this  sort.  Both  parties  put  themselves  upon  a  nice  point 
in  this  contract;  it  was  a  kind  of  wager  as  to  the  quantity  of  oil 
which  should  arrive  at  the  ports  mentioned  before  a  certain  period. 
They  must  be  held  strictly  to  their  contract,  there  being  no  equity 
to  interfere  with  the  terms  of  it. 

5.     Discharge  by  Condition  Subsequent:  Exercise  of  Option. 

Fitzgerald  v.  Allen.  128  Mass.  2^2. 

Fitzgerald  agreed  to  do  certain  work  on  a  conduit  for  Allen, 
who  had  a  contract  for  the  entire  work  with  the  Boston  Water 
Board.  The  contract  provided  that  Allen  might  cancel  the  con- 
tract if  so  ordered  by  the  city  engineer.  This  was  done,  and 
the  plaintiff  sues  for  the  value  of  the  work  done  previous  to  the 
cancellation  of  the  contract. 

Held,  that  a  contract  may  be  discharged  by  exercise  of  an  option 
contained  therein. 

Lord,  J. 

The  plaintiff  commenced  to  work  under  a  written  contract;  and, 
while  that  contract  was  in  force,  his  rights,  remedies  and  liabilities 
were  all  to  be  determined  by  the  terms  of  that  contract;  but,  when 
that  contract  was  wholly  terminated,  his  rights  would  depend  upon 
the  mode  in  which  it  was  terminated.  It  may  have  been  terminated 
by  his  own  voluntary  refusal  to  continue  to  perform  it,  or  by  the 
absolute  prohibition  of  the  defendants  to  permit  him  to  perform  it, 
or  by  his  absolute  inability  by  act  of  God  or  otherwise,  to  continue 
its  performance,  or  by  the  mutual  consent  of  the  parties,  or  by 
termination,  as  in  this  case,  under  a  power  reserved  by  the  terms 
of  the  contract  itself. 

If  the  special  contract  is  terminated  by  any  means  other  than 
voluntary  refusal  of  the  plaintiff  to  perform  the  same  upon  his  part, 
and  the  defendant  has  actually  received  benefit  from  the  labor  per- 
formed and   materials   furiushed  by  the  plaintiff,   the  value  of  such 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  237 

labor  and  materials  may  be  recovered  upon  a  count  upon  a  quantum 
meruit,  in  which  case  the  actual  benefit  which  the  defendant  re- 
ceives from  the  plaintiff  is  to  be  paid  for,  independently  of  the  terms 
of  the  contract.  The  contract  itself  is  at  an  end.  Its  stipulations 
are  as  if  they  had  not  existed.  But  this  does  not  imply  that  the 
contract  may  not  be  put  in  evidence,  and  its  terms  referred  to,  upon 
the  question  of  the  real  value  to  the  defendant  of  the  plaintiff's 
labor  and  materials.  If  the  time  of  performance  is  extended  very 
far  beyond  the  time  fixed  by  the  contract,  if  the  materials  furnished 
are  of  a  very  different  quality  from  that  provided  for  by  the  con- 
tract, these  facts  have  necessarily  a  bearing  upon  the  real  value  of 
the  services  and  labor.  The  original  contract  price,  too,  is  an  im- 
portant element  in  determining  the  value  of  the  labor  and  materials ; 
and  the  proportion  in  value  which  the  work  done  bears  to  the  whole 
value  of  the  contract  labor  and  materials  is  also  important  in  deter- 
mining the   quantum   meruit. 

It  follows  that  the  plaintiff  was  entitled  to  recover  what,  under 
all  the  circumstances  of  the  case,  his  labor  and  materials  were  act- 
ually worth. 

6.     Discharge  by  Condition  Subsequent:  Cancellation. 

The  Peoria  Insurance  Company  v.  Botto.  4/  III.  516. 

Botto  took  out  with  the  defendant  insurance  company  a  fire 
policy  which  contained  a  clause  that  the  company  might  cancel  the 
policy  at  its  election.  Botto  was  notified  of  cancellation  to  take 
effect  the  twenty-third  day  of  November,  but  although  he  was 
told  that  his  money  would  be  refunded  upon  his  calling  at  the 
company's  office,  no  premiums  were  returned  to  him.  The  in- 
sured property  was  afterwards  destroyed  by  fire,  and  Botto  claims 
that  the  policy  was  still  in  force. 

Held,  that  in  order  to  effect  the  cancellation  of  a  contract,  the 
party  canceling  must  restore  the  consideration. 

Breese,  C.  J. 

Admitting,  under  the  clause  quoted  from  the  policy,  that  the 
company,  without  cause,  could  cancel  the  policy,  this  power  con- 
ceded to  them  did  not  relieve  them  from  the  obligations  a  party 
to  any  other  contract  is  under  when  a  cancellation  has  been  deter- 
mined upon.  The  general  rule  in  such  cases,  we  believe,  is  that 
the  party  canceling  must  restore  whatever  he  has  obtained  by  the 
contract.  If  one  party  rescinds  he  must  return  the  property  pur- 
chased in  as  good  condition  as  when  he  received  it,  unless  it  is  en- 
tirely  worthless. 

To  effect  a  cancellation  of  this  policy,  the  notice  should  have 
been    accompanied    by    the    tender    of    the    unearned    premium.      It 


-o' 


COMMERCIAL    LAW    CASES 


was  no  part  of  the  business  of  the  assured  to  take  his  policy  to 
the  office,  there  have  it  canceled,  and  then  receive  the  unearned 
premium.  The  assured  did  not  desire  to  have  it  canceled,  and  it 
would  be  unreasonable  that  he  should  put  himself  to  trouble  and 
inconvenience  to  have  that  done  which  he  did  not  wish  to  have  done, 
and  in  doing  which  he  was  not  obliged  to  take  any  step.  We  do  not 
think,  with  appellants,  that  Botto's  saying  "All  right,"  when  the 
letter  was  handed  him,  was  an  assent  on  his  part  that  he  would 
call  at  the  office,  for  he  testifies  he  did  not  read  the  letter  whilst 
the  bearer  of  it  was  present,  and  that  not  a  word  was  said  about 
premium  to  be  refunded  at  the  office,  or  at  any  other  place. 

We  think  it  is  incumbent  on  every  insurance  company  acting 
under  such  a  clause  as  in  this  policy  to  tender  the  unearned  premium 
with  the  notice  of  cancellation.  The  tender  must  be  held  to  be  a 
condition  precedent,  else  in  case  of  litigation  growing  out  of  the 
transaction,  the  company  would,  all  the  time,  have  the  use  of  the 
money  of  the  assured,  and  he,  to  that  extent,  be  prevented  from 
effecting  any  other  insurance.  We  think  justice  and  fair  dealing 
require  this,  as  nothing  short  of  it  will  put  the  contracting  parties 
in  statu  quo. 

7.     Form  of  Discharge:   Contracts  under  Seal. 

McCreery  v.  Day.   up  N.  Y.  i. 

McCreery  and  others  had  contracted  to  build  part  of  the  Pitts- 
burgh, Youngstovvn  and  Chicago  Railroad,  a  one- fourth  interest 
in  which  they  assigned  by  contract  under  seal  to  Garrison,  who 
agreed  to  bear  one-fourth  of  the  expenditures  in  construction. 
Later,  this  agreement  was  annulled  by  an  unsealed  indorsement 
on  the  contract.  This  suit  is  against  Garrison's  executor  to  recover 
his  share  of  the  construction  expenses  under  the  original  contract. 

Held,  that  a  contract  under  seal  may  be  discharged  by  a  subse- 
quent contract  not  under  seal. 

Andrews,  J. 

The  plaintiffs  make  a  point,  founded  on  the  doctrine  of  the 
common  law,  that  a  contract  under  seal  cannot  be  dissolved  by  a 
new  parol  executory  agreement,  although  supported  by  a  good  and 
valuable  consideration,  "for,  every  contract  or  agreement  ought  to 
be  dissolved  by  matter  of  as  high  a  nature  as  the  first  deed."  The 
api)Iication  of  this  rule  often  produced  great  inconvenience  and  in- 
justice, and  the  rule  itself  has  been  overlaid  with  distinctions  in- 
vented by  the  judges  of  the  common  law  courts  to  escape  or  mitigate 
its  rigor  in  particular  cases.  I>ut  in  equity  the  form  of  the  new 
agreement  is  not  regarded,  and  under  the  recent  blending  of  the 
jurisdiction  of  law  and  equity,  and  the   right  given  by  the   modern 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  239 

rules  of  procedure  in  this  country  and  in  England  to  interpose  equi- 
table defenses  in  legal  actions,  the  common  law  rule  has  lost  much 
of  its  former  importance.  "The  ancient  technical  rule  of  the  common 
law,  that  a  contract  under  seal  cannot  be  varied  or  discharged  by  a 
parol  agreement,  is  thus  practically  superseded."  Courts  of  equity 
often  interfered  by  injunction  to  restrain  proceedings  at  law  to 
enforce  judgments,  covenants,  or  obligations  equitably  discharged 
by  transactions  of  which  courts  of  law  had  no  cognizance.  It  is  a 
necessary  consequence  of  our  changed  system  of  procedure,  that 
whatever  formerly  would  have  constituted  a  good  ground  in  equity 
for  restraining  the  enforcement  of  a  covenant,  or  decreeing  its  dis- 
charge, will  now  constitute  a  good  equitable  defense  to  an  action 
on  the  covenant  itself.  The  technical  distinction  between  a  satisfac- 
tion before  or  after  breach,  seems  to  have  been  disregarded  in  this 
state,  and  a  new  agreement  by  parol,  followed  by  actual  performance 
of  the  substituted  agreement,  whether  made  and  executed  before  or 
after  breach,  is  treated  as  a  good  accord  and  satisfaction  of  the  cov- 
enant. So  also,  a  new  agreement,  although  without  performance, 
if  based  on  a  good  consideration,  will  be  a  satisfaction  if  accepted  as 
such. 

In  the  present  case  it  may  be  justly  said,  that  when  the  agree- 
ment annulling  the  contract  of  March  2,  1882,  was  executed,  there 
had  been  no  breach  by  Garrison  of  his  covenant  therein,  as  he  had 
not  been  called  upon  by  the  plaintiffs  to  pay  his  share  of  the  con- 
struction account.  But  it  was  the  plain  intention  of  the  parties  that 
the  new  arrangement,  then  entered  into,  should  be  a  substitute  for 
the  liability  of  Garrison,  present  and  prospective,  under  the  contract 
of  March  2,  1882.  The  transaction  constituted  a  new  agreement  in 
satisfaction  of  the  prior  covenant,  and  was  accepted  as  such.  More- 
over, it  [is]  admitted  by  the  reply  that  the  contracts  of  October  25,  1882, 
were  carried  out.  It  is  a  case,  therefore,  of  an  executory  parol  con- 
tract, made  in  substitution  of  the  prior  sealed  contract,  afterwards 
fully  executed,  which  clearly,  under  the  authorities  in  this  state, 
discharged  the  prior  contract. 

8.     Form   of    Discharge:     Contracts   Within    the    Statute   of 
Frauds. 

Cummings  v.  Arnold,  j  Mctc.   (Mass.)  486. 

Arnold  agreed  to  sell  cloth  to  Cummings'  firm  on  specified 
terms.  The  parties  later  agreed  that  Cummings  should  pay  cash 
for  the  cloth  and  receive  a  5%  discount.  The  defendant,  /Vrnold, 
insists  that  such  payments  have  not  been  made.  The  question 
arises  v^^hether  this  new  contract  can  be  proved,  as  the  original 
contract  was  within  the  statute  of  frauds. 

Held,  that  new  terms  of  performance  may  be  substituted  orally 
for  a  contract  originally  within  the  statute  of  frauds. 


240  COMMERCIAL    LAW    CASES 

Wilde,  J. 

The  general  rule  is  that  no  verbal  agreements  between  the  parties 
to  a  written  contract,  made  before  or  at  the  time  of  the  execution  of 
such  contract,  are  admissible  to  vary  its  terms  or  to  affect  its  construc- 
tion. All  such  verbal  agreements  are  considered  as  varied  by  and 
merged  in  the  written  contract.  But  this  rule  does  not  apply  to  a 
subsequent  oral  agreement  made  on  a  new  and  valuable  consideration 
before  the  breach  of  the  contract.  Such  a  subsequent  oral  agreement 
may  enlarge  the  time  of  performance,  or  may  vary  any  other  terms 
of  the  contract,  or  may  waive  and  discharge  it  altogether. 

The  principal  design  of  the  statute  of  frauds  was  that  parties 
should  not  have  imposed  on  them  burdensome  contracts  which  they 
never  made,  and  be  fixed  with  goods  which  they  never  contemplated 
to  purchase.  The  statute,  therefore,  requires  a  memorandum  of  the 
bargain  to  be  in  writing,  that  it  may  be  made  certain ;  but  it  does  not 
undertake  to  regulate  its  performance.  That  is  left  to  be  decided  by 
the  rules  and  principles  of  law  in  relation  to  the  admission  of  parol 
evidence  to  vary  the  terms  of  written  contracts.  We  have  no  doubt, 
therefore,  that  accord  and  satisfaction,  by  a  substituted  performance, 
would  be  a  good  defense  in  this  action.  So  if  the  plaintiffs  had  paid 
for  the  goods  according  to  the  oral  agreements  to  pay  cash  or  give 
security,  and  the  defendants  had  thereupon  completed  the  delivery  of 
the  goods  contracted  for,  it  would  have  been  a  good  performance  of 
the  written  contract.  If  two  contracting  parties  are  bound  to  do 
certain  reciprocal  acts  simultaneously,  the  offer  of  one  of  the  parties 
to  perform  the  contract  on  his  part,  and  the  refusal  of  the  other  to 
comply  with  the  contract  on  his  part,  will  be  equivalent  to  a  tender 
and  refusal;  and  in  the  present  case,  we  think  it  equivalent  to  an 
accord  and  satisfaction,  which  was  prevented  by  the  fault  of  the 
plaintiffs,  who  agreed,  for  a  valuable  consideration — if  what  the 
defendants  offered  to  show  be  true — to  vary  the  terms  of  the  written 
contract  as  to  the  time  of  payment,  and  afterwards  refused  to  comply 
with  their  agreement.  If  the  defendants  on  their  part  had  refused 
to  perform  the  verbal  agreement,  then  indeed  it  could  not  be  set  up 
in  defense  of  the  present  action;  for  the  party  who  sets  up  an  oral 
agreement  for  a  substituted  performance  of  a  written  contract  is 
bound  to  prove  that  he  has  performed,  or  has  been  ready  to  perform, 
the  oral  agreement. 

This  distinction  avoids  the  difficulty  suggested  in  some  of  the 
cases  cited,  where  it  is  said  that  to  allow  a  party  to  sue  partly  on  a 
written  and  partly  on  a  verbal  agreement,  would  be  in  direct  opposi- 
tion to  the  requisitions  of  the  statute;  and  it  undoubtedly  would  be; 
but  no  party  having  a  right  of  action  can  be  compelled  to  sue  in  this 
form.  He  may  always  declare  on  the  written  contract;  and  unless 
the  defendant  can  prove  performance  according  to  the  terms  of  the 
contract,  or  according  to  the  agreement  for  a  substituted  performance, 
the  plaintiff  would  be  entitled  to  judgment.  We  think,  therefore,  that 
the  evidence  of  the  oral  agreements,  offered  at  the  trial,  should  have 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  24 1 

been  admitted;  the  same  not  being  within  tlie  statute  of  frauds,  and 
the  evidence  being  admissible  by  the  rules  of  law. 


B.     Discharge  by  Performance. 

I.     What  Constitutes  Performance. 

Smith  V.  Brady,  i/  N.  Y.  1/3. 

Smith  agreed  to  pay  Brady  a  certain  sum  for  building  houses 
under  a  contract  which  provided  that  the  final  payment  shotild  be 
made  when  the  architects  certified  that  the  work  was  completed. 
Smith  failed  to  procure  such  a  certificate,  but  sues  on  the  con- 
tract. 

Held,  that  having  failed  to  perform  or  to  attempt  to  perform 
a  condition  precedent,  the  plaintiff  cannot  recover. 

Harris,  J. 

Assuming  that  the  contracts  had  been  so  far  performed  as  to 
justify  the  plaintiff  in  treating  them  as  substantially  executed,  as  I  am 
inclined  to  think  they  were,  yet  the  final  payment  for  the  work  was 
to  be  made  when  it  was  completed  and  a  certificate  of  the  architects 
to  that  effect  obtained.  The  parties  have  seen  fit  to  make  the  pro- 
duction of  such  a  certificate  a  condition  precedent  to  the  payment. 
The  plaintiff  is  as  much  bound  by  this  part  of  his  contract  as  any 
other.  It  is  not  enough  for  him  to  bring  his  action  and  say  that  he 
has  completed  the  work  which  he  undertook  to  do.  He  has  agreed 
that  the  architects  named  should  decide  whether  the  work  is  completed 
or  not.  He  cannot  now  withdraw  the  decision  of  this  question  from 
them  and  refer  it  to  the  determination  of  a  legal  tribunal. 

Had  it  been  shown  by  the  plaintiff  that  he  had  made  application 
to  the  architects  for  the  requisite  certificate,  and  that  they  had  obsti- 
nately and  unreasonably  refused  to  certify,  it  might  have  been  proper 
perhaps  for  the  plaintiff  to  establish  his  right  to  recover  by  other 
evidence.  However  this  may  be,  it  is  not  pretended  in  this  case  that 
the  plaintiff  ever  made  an  effort  to  procure  the  certificate.  The 
referee  merely  finds  the  fact  that  "the  architects  had  not  given  certifi- 
cates that  the  work  was  all  done  and  finished." 

The  referee  has  found  that  the  defendant  took  possession  of  the 
cottages  and  appendages  without  objection  at  the  time,  and  appro- 
priated the  same  to  his  own  use,  and  it  is  insisted  that,  if  the  produc- 
tion of  the  architect's  certificate  was  a  condition  precedent  to  the 
right  of  the  plaintiff  to  bring  his  action  for  the  balance  due  upon  the 
contracts,  yet  the  defendant  has  waived  this  condition  by  accepting 
the  work  without  objection;  but  it  is  a  sufficient  answer  to  this  position 
to  say  that,  whether  or  not  the  performance  of  the  condition  in  question 
was  waived  was  a  question  of  fact  to  be  determined  by  the  referee 


242  COMMERCIAL    LAW    CASES 

from  the  evidence  before  him,  and  no  such  fact  has  been  found  by 
him. 


2.     Substantial  Performance. 

Daly  &  Sons,  Inc.  v.  The  Nciv  Haven  Hotel  Co.  gi  Conn.  280. 

Daly  &  Sons  contracted  in  writing  to  install  a  heating  and 
ventilating  system  in  the  Hotel  Taft  at  New  Haven,  in  accordance 
with  specifications.  When  Daly  &  Sons  had  nearly  completed 
the  work,  which  could  have  been  fully  completed  for  $500,  the 
architects  ordered  certain  changes,  and.  as  Daly  &  Sons  did  not 
agree  to  these  changes,  authorized  the  Hotel  Company  to  secure 
others  to  finish  the  work.  The  plaintiffs  sue  for  the  unpaid 
balance. 

Held,  that  when  a  contract  is  terminated  by  the  other  party 
without  fault  of  one  who  has  substantially  performed,  he  may  re- 
cover the  contract  price  less  what  it  would  cost  to  complete  the 
contract. 

Prentice,  C.  J. 

Doubtless  counsel  for  the  defendant  are  right  in  saying  that  the 
complaint  gives  evidence  that  the  plaintiff  was  not  looking  to  a 
recovery  upon  the  basis  of  performance,  since  the  averment  that  the 
work  was  done  under  a  contract  providing  for  payment  after  com- 
pletion, is  unaccompanied  by  one  of  completion.  But  it  does  not 
follow  from  that  fact  that  the  amount  for  which  foreclosure  may  be 
had  is  to  be  determined  upon  direct  proof  of  the  reasonable  worth 
of  the  labor  performed  and  materials  furnished,  and  not  with  refer- 
ence to  the  contract  price  presumably  embodying  an  element  of  profit. 
On  the  contrary,  the  well  established  rule  in  this  and  other  juris- 
dictions is  that  the  reasonable  value  for  which  recovery  may  be  had 
in  cases  of  substantial  performance  of  building  contracts,  is  to  be 
ascei  tained  with  reference  to  the  contract  price  and  by  deducting  from 
that  price  such  sum  as  ouglit  to  be  allowed  for  the  omissions  and 
variations. 

The  rule  stated  as  applicable  to  building  contracts  is  an  exception 
to  that  governing  contracts  generally.  It  had  its  origin  in  considera- 
tions of  equity  and  justice,  and  its  recognition  is  due  to  the  fact  that 
substantial  justice  in  such  cases  can  be  done  in  no  other  way.  There 
is  no  reason  why  one  who  has  substantially  performed  such  a  contract, 
but  unintentionally  failed  of  strict  performance  in  the  matter  of  minor 
details,  should  liave  imposed  upon  him  as  a  condition  of  recovery  for 
that  of  wliich  the  other  party  has  received  the  benefit,  the  burden  of 
"-bowing  by  direct  evidence  its  reasonable  value,  or  why  he  should  be 
deprived  of  all  benefit  of  the  contract  which  he  has  substantially  per- 
formed.    The  doctrine  of  substantial  performance   has  had  the  ap- 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  243 

proval  of  the  courts  for  the  very  purpose  of  avoiding  the  hardships 
arising  from  the  operation  of  the  general  rule,  and  the  principles 
governing  its  application  were  designed  to  work  to  the  fullest  attain- 
able extent  approximate  justice  to  all  concerned. 

In  the  determination  of  the  amount  of  deduction  which  ought  to 
be  made  in  the  application  to  specific  cases  of  the  rule  stated,  regard 
must  be  had  to  the  circumstances  which  each  presents.  A  different 
method,  for  instance,  is  required  to  accomplish  the  ends  of  justice 
where  the  shortcomings  are  such  as  may  be  remedied  and  completion 
according  to  the  contract  had  without  substantial  interference  with 
the  structure  of  the  building,  than  where  the  remedy  and  completion 
involves  substantial  structural  changes.  In  the  first  case — and  that, 
upon  the  finding,  is  this  case — the  approved  method  under  ordinary 
conditions  is  to  deduct  from  the  contract  price  such  sum  as  it  would 
cost  to  make  the  work  comply  with  the  contract.  In  the  latter  case, 
the  amount  of  deduction  might  be  measured  by  the  diminished  value 
of  the  building  to  the  owner  by  reason  of  the  defects.  In  any  case, 
the  deduction  is  to  be  so  determined  that  the  owner's  resultant  pay- 
ment will  be  fair  and  reasonable  compensation  with  reference  to  the 
contract  price  for  what  of  value  to  him  he  has  received  and  no  more, 
and  that  the  contractor  shall  receive  a  fair  reward  determined  by  the 
contract  standard  for  the  benefit  conferred  by  him  in  his  attempt  to 
execute  the  contract. 

The  fact  that  the  plaintiff  was  wrongfully  prevented  by  rtie 
defendant  from  continuing  with  the  work  does  not  stand  in  the  way 
of  the  defendant's  indebtedness  to  it  being  determined  on  the  basis 
of  substantial  performance.  By  such  performance  it  won  the  right 
to  recover  with  reference  to  the  contract  price,  and  it  was  not  in  the 
defendant's  power  to  deprive  it  of  the  benefits  of  such  recovery  by 
a  wrongful  act.  It  well  may  be  that  in  such  case  the  contractor  would 
have  the  right  to  treat  the  contract  as  rescinded,  and  avail  himself  of 
redress  against  the  wrongdoer  by  the  recovery  of  damages.  But  to 
hold  that  by  reason  of  an  act  of  wrongdoing  on  the  part  of  the  owner 
a  contractor  loses  the  right  which  was  his  by  virtue  of  his  substantial 
performance,  is  quite  another  matter. 

It  is  one  of  the  conditions  of  a  contractor's  right  to  recover  as  for 
substantial  performance,  that  his  default  was  not  wilful  or  voluntary. 
The  fact  that  the  plaintiff  did  not  continue  in  its  efforts  to  complete 
performance  until  its  accomplishment,  did  not  convert  its  default  in 
that  respect  into  a  wilful  or  voluntary  one.  It  was  deprived  of  the 
opportunity  to  do  what  it  was  proposing  to  do  and  engaged  in  doing 
by  way  of  completion  of  details  and  correction  of  faults,  by  the  act 
of  the  defendant  who,  acting  upon  the  authority  of  a  certificate  of 
default  given  by  the  architects  and  proceeding  as  provided  in  the 
contract,  terminated  its  employment.  Had  this  action  on  the  part  of 
the  architects  and  owner  been  justified  by  the  plaintiff's  conduct  in 
respect  to  the  execution  of  its  contract,  a  very  different  situation  would 
be  presented.  But  the  court  has  found  that  there  was  no  such  justi- 
fication for  the  termination  of  the  plaintiff's  employment. 


244  COMMERCIAL    I  AW    CASES 

3.     Quantum  Meruit. 

Hayward  v.  Leonard.   7  Pick.    (Mass.)    180. 

Hayward  contracted  to  build  a  house  for  Leonard  to  conform 
to  certain  specifications.  As  some  of  the  work  done  was  not  in 
accordance  with  the  terms  of  the  contract,  Leonard  refused  to 
accept  the  house.  The  plaintiff  sues  to  recover  the  value  of  his 
work. 

Held,  that  when  a  contract  has  been  performed  without  wilful 
violation  of  its  terms  but  not  exactly  in  accordance  with  the  con- 
tract, the  plaintiff  may  recover  the  value  of  his  work  and  materials. 

Parker,  C.  J. 

Different  judges  and  different  courts  have  held  different  doctrines, 
and  sometimes  the  same  court  at  different  times.  The  point  in  con- 
troversy seems  to  be  this:  whether  when  a  party  has  entered  into  a 
special  contract  to  perform  work  for  another,  and  to  furnish  materials, 
and  the  work  is  done  and  the  materials  furnished,  but  not  in  the 
manner  stipulated  for  in  the  contract,  so  that  he  cannot  recover  the 
price  agreed  by  an  action  on  that  contract,  yet  nevertheless  the  work 
and  materials  are  of  some  value  and  benefit  to  the  other  contracting 
party,  he  may  recover  on  a  quantum  meruit  for  the  work  and  labor 
done,  and  on  a  quantum  valebant  for  the  materials.  We  think  the 
weight  of  modern  authority  is  in  favor  of  the  action,  and  that  upon 
the  whole  it  is  conformable  to  justice,  that  the  party  who  has  the 
possession  and  enjoyment  of  the  materials  and  labor  of  another,  shall 
be  held  to  pay  for  them,  so  as  in  all  events  he  shall  lose  nothing  by 
the  breach  of  the  contract.  If  the  materials  are  of  a  nature  to  be 
removed  and  liberty  is  granted  to  remove  them,  and  notice  to  that 
effect  is  given,  it  may  be  otherwise.  But  take  the  case  of  a  house 
or  other  building  fixed  to  the  soil,  not  built  strictly  according  to 
contract,  but  still  valuable  and  capable  of  being  advantageously  used, 
or  profitably  rented — there  having  been  no  prohibition  to  proceed  in 
the  work  after  a  deviation  from  the  contract  has  taken  place — no 
absolute  rejection  of  the  building,  with  notice  to  remove  it  from  the 
ground;  it  would  be  a  hard  case  indeed  if  the  builder  could  recover 
nothing. 

ArTd  yet  he  certainly  ought  not  to  gain  by  his  fault  in  violating 
his  contract,  as  be  may,  if  he  can  recover  the  actual  value;  for  he 
may  bave  contracted  to  build  at  an  under  price,  or  the  value  of  such 
property  may  have  risen  since  the  contract  was  entered  into.  The 
owner  is  entitled  tosethe  benefit  of  the  contract,  and  therefore  he  should 
be  held  to  pay  in  damages  only  so  much  as  will  make  the  price  good, 
deducting  the  loss  or  damage  occasioned  by  the  variation  from  the 
contract. 

When  we  speak  of  the  law  allowing  the  party  to  recover  on  a 
quantum  meruit  or  quantum  valebant,  where  there  is  a  special  contract. 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  245 

we  mean  to  confine  ourselves  to  cases  in  which  there  is  an  honest 
intention  to  go  by  the  contract,  and  a  substantive  execution  of  it,  but 
some  comparatively  slight  deviations  as  to  some  particulars  provided 
for.     Cases  of  fraud  or  gross  negligence  may  be  exceptions. 

4.     Quantum  Meruit:    Effect  of  Non-Compliance  with  Terms 
of  Contract. 

Gillis  V.  Co  be.   777  Mass.  584. 

Gillis  contracted  to  build  an  addition  to  a  brewery  belonging 
to  the  defendants.  Hi.s  firm  failed  to  put  iron  rods  in  the  con- 
crete as  required  by  the  specifications  and  the  floor  sank  because 
of  the  weight  of  the  tanks  placed  upon  it.  Gillis  sues  to  recover 
for  the  value  of  his  work,  not  upon  the  special  contract. 

Held,  that  when  a  special  contract  has  been  made  and  not  per- 
formed, the  plaintiff  can  recover  only  to  the  extent  of  the  value 
given  to  the  defendant  by  reason  of  his  efforts. 

Loring,  J. 

Where  a  contractor  does  work  and  furnishes  materials  under  a 
special  contract,  he  has  no  right  to  recover  the  value  of  the  work 
plus  the  value  of  the  materials  under  a  quantum  meruit,  but  is  limited 
tO'the  right  to  be  paid  for  them  specified  in  the  contract;  no  suit  can 
be  maintained  by  him  on  the  common  counts  until  the  contract  is 
fully  performed,  and  then  only  to  recover  the  contract  price. 

If  he  resorts  to  a  recovery  under  the  rule  in  Hayward  v.  Leonard, 
7  Pick.  181,  because,  being  in  default  of  the  performance  of  the  con- 
tract, or,  what  is  the  same  thing,  because,  being  unable  to  prove  that 
he  did  perform  the  contract,  he  has  no  rights  under  it,  he  has  not 
the  same  right  to  recover  for  the  value  of  the  work  done  and  materials 
furnished  by  him,  that  a  person  has  who  has  done  work  and  furnished 
materials  as  he  has  been  requested  to  do.  In  the  latter  case,  it  is 
immaterial  whether  the  result  of  his  work  is  of  any  value  to  the 
defendant  or  not.  But  one  who  has  done  work  under  a  special  con- 
tract, and  resorts  to  a  recovery  under  the  principle  of  Hayward  v. 
Leonard,  recovers  on  the  ground,  and  only  on  the  ground,  that  the 
result  of  his  work  is  of  some  benefit  to  the  defendant;  he  comes  into 
court  admitting  that  he  has  not  done  what  he  agreed  to  do  and  that 
he  cannot  hold  the  defendant  on  his  promise  to  pay  him  the  contract 
price ;  more  than  that,  he  admits  that  the  part  which  he  has  failed 
to  perform,  is  one  that  so  far  goes  to  the  essence  of  the  contract, 
that  it  is  a  condition  precedent  to  a  recovery  by  him  on  the  contract ; 
for,  if  the  part  which  he  agreed  to  perform  and  did  not  perform,  was 
of  slight  importance,  it  is  not  a  condition  precedent ;  he  can  recover 
the  contract  price  without  performing  it,  and  the  only  advantage  which 
the  defendant  can  take  of  it  is  by  way  of  recoupment,  or  by  a  cross- 
action,  in  which  the  burden  is  on  him,  the  defendant,  to  prove  the 


246  COMMERCIAL    LAW    CASES 

damage  he  has  suffered  from  its  nonperformance.  The  only  ground 
on  which  a  plaintiff  who  resorts  to  a  recovery  under  the  principle 
of  Hayward  v.  Leonard  is  entitled  to  recover  anything  is  that,  though, 
so  far  as  his  contract  rights  are  concerned,  he  is  entirely  out  of  court, 
yet  it  is  not  fair  that  the  defendant  should  go  out  of  the  transaction 
as  a  whole  with  a  profit  at  his,  the  plaintiff's  expense,  and  therefore 
if  the  structure,  which,  for  the  purpose  of  a  recovery  on  this  ground, 
he  necessarily  admits  does  not  come  up  to  the  contract  requirements 
in  essential  particulars,  is,  nevertheless,  a  thing  of  some  value,  the 
defendant  ought  to  make  him  compensation  therefor.  That  such  is 
the  ground  on  which  a  recovery  can  be  had  in  such  a  case  was  laid 
down  in  the  original  case  of  Hayward  v.  Leonard,  and  has  been 
repeated  in  the  subsequent  decisions. 

It  is  plain,  therefore,  that  the  plaintiff  who  seeks  a  recovery 
under  the  principle  of  Hayward  v.  Leonard  for  work  done  under  a 
special  contract  does  not  recover  on  the  same  ground  as  that  on  which 
a  plaintiff  recovers,  who  has  done  work  as  he  has  been  requested  to 
do.  So  far  as  his  case  travels  on  that  ground,  he  is  out  of  court; 
his  sole  claim  to  be  paid  anything  is  that  if  he  is  not  paid,  the 
defendant  will  profit  at  his  expense ;  until  he  has  proved  that  the 
defendant  will  in  that  case  profit  at  his  expense,  he  has  not  made  out 
a  prima  facie  case  to  be  paid  anything,  and  until  he  has  proved  how 
much  that  profit  will  be,  his  prima  facie  case  is  not  complete.  When 
the  fact  appears  in  evidence  that  the  work  for  which  money  is  sought 
was  done  under  a  special  contract,  and  that  the  plaintiff  cannot  recover 
under  the  special  contract,  but  still  seeks  a  recovery,  there  is  no 
question  of  the  value  of  his  work  and  materials  proved  in  the  usual 
way,  and  he  does  not  make  out  a  prima  facie  case  by  proving  their 
value  according  to  regular  rules ;  to  make  out  a  case  for  recovery 
for  such  work  and  materials  so  furnished,  he  must  prove  how  much 
the  result  of  his  work  had  benefited  the  defendant,  he  must  prove 
what  the  fair  market  value  of  the  thing  produced  by  his  misdirected 
work  is,  and,  until  he  has  done  that,  he  has  not  made  out  even  a 
prima  facie  case  on  which  he  is  entitled  to  recover  anything. 

It  is  not  correct  to  say  that  the  plaintiffs  are  in  this  way  made 
liable  for  the  consequential  damages  caused  by  the  sinking  of  the 
floor  in  cancellation  of  a  sum  otherwise  due  them,  without  proving 
that  they  are  to  blame  for  it.  In  this  case,  there  is  no  sum  otherwise 
due  the  plaintiffs.  Unless  by  a  happy  accident  it  turns  out  that  the 
building  produced  by  their  work  has  added  to  the  value  of  the 
defendants'  land,  nothing  is  due  to  them.  They  have  failed  to  prove 
that  they  complied  with  the  contract  in  the  construction  of  the  part 
of  the  building  which  has  given  way,  and  in  satisfying  the  architect 
of  that  fact;  that  being  so,  nothing  is  due  them  at  all,  so  far  as  the 
terms  of  the  contract  are  concerned;  they  have  no  claim  to  be  paid 
the  contract  price,  for  they  have  failed  to  prove  that  they  complied 
with  the  requirements  of  the  contract  in  matters  going  to  the  essence 
of  it ;  they  have  no  claim  to  the  value  of  the  work  i)ius  the  value  of 
the  materials,  for  the  work  was  done  and  the  materials  were  furnished 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  247 

under  a  special  contract,  and  no  payment  is  due  for  them  except 
upon  the  terms  of  the  special  contract.  Their  only  claim  is  that  it  is 
not  fair  that  the  defendants  should  profit  at  their  expense,  and  that, 
for  that  reason,  if  the  building  which  is  the  result  of  their  labor  has 
added  to  the  value  of  the  defendants'  land,  the  defendants  should 
make  them  compensation  therefor  and  to  that  extent.  That  being 
the  sole  ground  on  which  the  plaintiffs  are  entitled  to  anything,  the 
burden  does  not  lie  on  the  defendants  to  prove  that  the  thing  which 
caused  the  floor  to  sink  and  the  building  to  be  of  no  market  value 
(if  it  is  of  no  market  value),  is  a  thing  for  which  the  plaintiffs  were 
to  blame.  The  plaintiffs'  case  is  that  the  building  which  they  have 
placed  upon  the  land  of  the  defendants  against  their  wishes  has  added 
to  the  value  of  the  defendants'  land ;  if  it  does  not,  they  have  no 
rights  in  addition  to  their  rights  under  the  contract,  and  it  is  of  no 
consequence  why  it  is  that  the  building  does  not  add  to  the  value 
of  the  land. 


5.    Negotiable  Instruments  as  Payment. 

The  Kimball  3  Wall.   (U.  S.)  3/. 

The  owners  of  the  Kimball  chartered  her  for  a  sum  of 
money,  part  of  which  was  payable  "after  discharge  of  homeward 
cargo."  While  the  ship  was  still  at  sea,  the  charterers  gave  their 
note  for  $10,000  "on  account  of  the  charter."  They  afterwards 
failed.     The  owners  claim  a  lien  on  the  cargo  for  unpaid  money. 

Held,  that  by  the  general  rule,  the  giving  of  a  note  does  not 
constitute  payment. 

Field,  /. 

The  notes  were  given  before  the  termination  of  the  voyage,  and 
consequently  before  the  balance  of  the  charter  became  due.  Treating 
them  as  an  advance  of  a  portion  of  the  freight,  they  could  be  recovered 
back,  or  their  amount,  if  paid,  if  the  vessel  did  not  arrive.  Freight 
being  the  compensation  for  the  carriage  of  goods,  if  paid  in  advance, 
is  in  all  cases,  unless  there  is  a  special  agreement  to  the  contrary,  to 
be  refunded  if  from  any  cause  not  attributable  to  the  shipper  the  goods 
be  not  carried.  And  there  was  no  such  special  agreement  in  this  case. 
The  notes  were  drawn  so  as  to  mature  near  the  time  of  the  anticipated 
arrival  of  the  ship,  and  according  to  the  statement  of  the  broker  who 
made  the  arrangement,  they  were  given  for  the  accommodation  of  the 
shipowner,  and  were  to  be  held  over  or  renewed  in  case  they  fell 
due  before  the  arrival.  The  statement  is  consistent  with  the  nature 
of  the  transaction,  and  is  sufficient  to  repel  any  presumption,  under 
the  law  of  Massachusetts,  that  the  notes  were  taken  in  discharge  or 
payment  of  the  claim  for  the  charter  money.  The  presumption  which 
prevails  in  that  state,  that  a  promissory  note  extinguishes  the  debt  or 


248  COMMERCIAL    LAW    CASES 

claim  for  which  it  is  given,  may  be  repelled  by  any  circumstances 
showing  that  such  was  not  the  intention  of  the  parties. 

By  the  general  commercial  law,  as  well  of  England  as  of  the 
United  States,  a  promissory  note  does  not  discharge  the  debt  for 
which  it  is  given  unless  such  be  the  express  agreement  of  the  parties ; 
it  only  operates  to  extend  until  its  maturity  the  period  for  the  payment 
of  the  debt.  The  creditor  may  return  the  note  when  dishonored, 
and  proceed  upon  the  original  debt.  The  acceptance  of  the  note  is 
considered  as  accompanied  with  the  condition  of  its  payment.  Thus 
it  was  said,  as  long  ago  as  the  time  of  Lord  Holt,  that  "a  bill  shall 
never  go  in  discharge  of  a  precedent  debt,  except  it  be  part  of  the 
contract  that  it  should  be  so."  Such  has  been  the  rule  in  England 
ever  since ;  and  the  same  rule  prevails,  with  few  exceptions,  in  the 
United  States.  The  doctrine  proceeds  upon  the  obvious  ground  that 
nothing  can  be  justly  considered  as  payment  in  fact,  but  that  which 
is  in  truth  such,  unless  something  else  is  expressly  agreed  to  be  re- 
ceived in  its  place.  That  a  mere  promise  to  pay  cannot  of  itself  be 
regarded  as  an  effective  payment  is  manifest. 

The  rule  in  Massachusetts  is  an  exception  to  the  general  law ; 
but  even  there,  as  we  have  said,  the  presumption  that  the  note  was 
given  in  satisfaction  of  the  debt  may  be  repelled  and  controlled  by 
evidence  that  such  was  not  the  intention  of  the  parties,  and  this 
evidence  may  arise  from  the  general  nature  of  the  transaction,  as  well 
as  from  direct  testimony  to  the  fact. 

6.     Application  of  Payments  on  Account. 

Caldzvell  v.   IVentzvorth.   14  N.  H.  4^1. 

At  different  times  Caldwell  sold  Wentworth  quantities  of  rum, 
saleratus  and  molasses.  These  sales  were  in  part  illegal,  as  Cald- 
well had  no  license  to  sell  liquor.  Wentworth  paid  money  on  ac- 
count without  specifying  the  items  to  which  it  should  be  applied. 
Caldwell  sues  for  the  balance  and  the  question  arises  whether  any 
portion  of  the  money  paid  shotild  be  considered  as  a  voluntary 
payment  on  account  of  the  illegal  sales. 

Held,  that  payments  on  account  are  to  be  applied  as  the  parties 
intend,  but  if  they  have  made  no  application,  the  law  will  apply 
them  to  the  earliest  legal  debts. 

Parker,  C.  J. 

A  debtor  paying  money  to  a  creditor  who  has  several  claims 
against  him,  may  direct  the  application  of  the  payment  to  which  claim 
he  pleases.  The  creditor  cannot  apply  what  he -thus  receives  against 
the  will  and  directions  of  him  who  makes  the  payment,  and  who  has 
at  the  time  a  right  to  control  what  is  then  his  own.  There  is  no 
evidence,  however,  in  this  case,  that  Brown  gave  any  express  direction 
re.sj)ccting  the  application  of  the  payments. 


OPERATION    AND   DISCHARGE   OF   CONTRACTS  249 

If  the  debtor  makes  no  application  of  the  payment,  the  creditor 
may  at  the  time  apply  it  to  any  demand  due  from  the  debtor.  It  has 
been  held  that  the  creditor  may  make  the  application  at  any  time 
before  suit,  but  this  is,  perhaps,  not  quite  clear.  But  the  right  of 
the  creditor  to  apply  a  payment  made  generally  to  which  claim  he 
pleases,  extends  only  to  lawful  demands.  If  he  have  two  claims,  one 
of  which  is  legal  and  the  other  illegal,  he  has  no  right  even  at  the 
time  of  payment  to  apply  the  payment  to  the  illegal  claim.  But  there 
is  no  evidence  in  the  present  case  that  the  plaintiff  has  at  any  time 
made  any  special  application  of  these  payments. 

If  no  application  of  the  payment  be  made  at  the  time  by  either 
debtor  or  creditor,  the  law  will  make  the  application.  Some  decisions 
say  to  the  earliest  debt.  Following  out  this  principle  in  Bosanquet  v. 
Wray,  6  Taunt.  597,  the  creditor  was  permitted  to  apply  the  payment 
to  a  purely  equitable  debt,  and  to  sue  at  law  for  the  later  legal  debt. 
Other  decisions  qualify  this  rule  respecting  the  application  to  the 
earliest  debt.  Particular  equities  have  a  precedence,  and  the  prin- 
ciple may  be  stated  to  be,  that  where  there  is  no  particular  equity  or 
reason  for  a  different  application,  the  law  will  apply  the  payment  to 
the  earliest  debt.  Some  cases  hold,  in  favor  of  a  surety,  that  such 
an  application  shall  be  made  as  will  be  for  his  benefit.  Other  cases 
hold  that  for  the  benefit  of  the  creditor,  the  application  shall  be  made 
to  the  debt  least  secured.  Perhaps  these  two  classes  of  cases  do  not 
present  any  conflict  in  principle,  although  one  is  in  favor  of  the 
creditor  as  against  the  debtor,  and  the  other  favors  the  surety  at  the 
creditor's  expense.  They  may  well  stand  together,  applying  the  last 
to  those  cases  where  there  is  no  surety.  They  constitute  exceptions 
to  the  rule  applying  the  payment  to  the  earliest  debt,  but  the  present 
case  raises  neither  of  these  exceptions. 

If  the  earlier  debt  is  not  due  and  payable  at  the  time  of  the 
payment,  the  law  will  apply  it  to  the  debt  which  had  a  later  origin 
but  was  then  due,  upon  the  obvious  presumption  that  the  one  party 
intended  to  pay,  and  the  other  must  have  understood  that  he  was 
receiving  the  money  in  discharge  of  something  which  the  creditor 
had  the  right  to  claim  at  the  time, 

7.     Effect  of  Tender. 

Salinas  &  Son  v.  Ellis.  26  S.  C.  337- 

Ellis  owed  money  to  Salinas  &  Son,  partly  on  a  mortgage,  and 
partly  on  an  unsecured  note.  He  offered  to  pay  the  money  due  on 
the  mortgage,  which  the  attorney  for  Salinas  &  Son  refused  to 
accept,  unless  the  whole  indebtedness  was  discharged.  Salinas  & 
Son  bring  an  action  to  foreclose  the  mortgage. 

Held,  that  tender  of  payment  of  money  due  under  a 
mortgage  will  discharge  the  mortgage,  although  the  debt  re- 
mains. 


250  COMMERCIAL   LAW    CASES 

McGowan,  J. 

A  tender  is  defined  to  be  "an  offer  by  a  debtor  to  his  creditor  of 
the  amount  of  the  debt.  The  offer  must  be  in  lawful  money,  which 
must  be  actually  produced  to  the  creditor,  unless  by  words  or  acts  he 
waives  production,  and  the  offer  must  be  definite  and  unconditional." 

It  seems  that  when  the  proceeding  was  instituted  to  foreclose  the 
mortgage,  the  defendant  did  not  make  good  the  tender  or  follow  it 
up  by  bringing  into  court  the  money  which  had  been  tendered  and 
refused;  and  as  that  was  not  done,  the  plaintiffs  insist  that  the  mere 
tender  and  refusal  must  go  for  nothing.  But  the  defendant  claims 
that  while  it  did  not  satisfy  the  debt,  upon  which  there  may  be  judg- 
ment, it  had  at  least  the  effect  of  discharging  the  lien  of  the  mort- 
gage, the  mere  security  and  accessory  of  the  debt.  There  is  un- 
doubtedly a  difference  between  a  mere  tender  and  the  payment  of 
money  into  court.  As  it  was  expressed  in  Black  v.  Rose,  14  S.  C.  278: 
"The  payment  of  money  into  court  under  order  is  certainly  more  than 
a  simple  tender.  A  tender  is  an  offer  to  pay  by  the  debtor  before 
suit,  and  cannot  be  made  after  suit  brought.  It  is  purely  ex  parte. 
If  it  is  not  accepted,  the  debtor  must  retain  his  money,  and  if  estab- 
lished on  plea,  the  only  effect  is  to  stop  interest  thenceforward  on  the 
amount  tendered.  But  a  payment  into  court  is  different.  It  is  not 
ex  parte,  but  done  by  order  of  the  court.  The  money  paid  in  is  for 
the  plaintiff,  and  the  possession  of  it  cannot  be  resumed  by  the  debtor. 
In  the  further  prosecution  of  the  case,  that  much  is  stricken  from  the 
record,  whether  the  plaintiff  takes  out  the  money  or  not." 

This  as  to  the  debt  itself.  But  suppose  there  is  a  mortgage  of 
real  estate  to  secure  the  debt;  does  a  tender  (although  not  brought 
into  court)  have  any  effect  upon  the  lien  of  that  mortgage,  and  if  so, 
what  ?  All  the  authorities  agree  that  even  at  common  law,  where  the 
legal  title  is  in  the  mortgagee,  the  eft'ect  of  a  tender  "at  the  law  day," 
was  to  satisfy  the  condition  of  the  mortgage  as  fully  as  if  payment 
had  been  made  and  the  estate  revested  in  the  mortgagor. 

As  the  question  is  really  reduced  to  the  time  at  which  the  tender 
is  made — whether  it  must  be  the  day  on  which  the  debt  falls  due  and 
the  condition  of  the  mortgage  is  broken,  or  may  be  at  any  time  after- 
wards before  action  brought — it  is  very  obvious  that  the  question 
must  be  greatly  affected  by  the  character  given  to  a  mortgage  of  land 
in  the  different  states.  In  those  states  where  the  old  common  law 
mortgage  is  still  retained,  giving  to  the  mortgagee  an  estate  on 
condition,  to  become  absolute  upon  the  breach  of  that  condition  by 
nonjjayment  at  the  day  named,  we  can  well  understand  how  the 
courts  would  have,  as  a  logical  consequence,  to  hold  that,  in  order  to 
have  the  effect  of  discharging  the  mortgage,  a  tender  must  be  made 
punctually  at  the  hour  of  the  day  named.  But  we  must  confess  that 
where,  as  in  this  state,  the  mortgage  is  a  mere  security  for  the  debt, 
and  the  legal  title  remains  in  the  mortgagor,  precisely  the  same  after 
as  before  the  debt  is  due,  we  cannot  understand  why  a  tender  after 
it  becomes  due  but  before  suit,  should  not  have  the  same  effect  as  if 


OPERATION    AND   DISCHARGE   OF   CONTRACTS  25 1 

it  had  been  made  "at  the  law  day."  It  strikes  us  that  in  all  the  states 
where  the  mortgage  of  real  estate  is  a  mere  security  for  the  debt, 
this,  upon  principle,  should  be  the  ruling. 

C.     Discharge  by  Breach. 

I.     Anticipatory  Breach. 

O'Neill  V.  Supreme  Council,  American  Legion  of  Honor,  yo 
N.  J.  L.  410. 

O'Neill  had  a  life  insurance  policy  for  $5,000  with  the  de- 
fendant association  which  it  refused  to  regard  as  in  force  beyond 
the  sum  of  $2,000,  although  O'Neill  had  tendered  all  payments 
required.     He  sues  for  breach  of  contract. 

Held,  that  by  the  general  rule  an  action  may  be  brought  for 
breach  of  contract  before  the  time  of  performance  has  arrived. 

Pitney,  J. 

Numerous  reported  decisions  have  laid  down  the  doctrine  that 
where  a  contract  embodies  mutual  and  interdependent  conditions  and 
obligations,  and  one  party  either  disables  himself  from  performing, 
or  prevents  the  other  from  performing,  or  repudiates  in  advance  his 
obligations  under  the  contract  and  refuses  to  be  longer  bound  thereby, 
communicating  such  repudiation  to  the  other  party,  the  latter  party 
is  not  only  excused  from  further  performance  on  his  part,  but  may, 
at  his  option,  treat  the  contract  as  terminated  for  all  purposes  of 
performance,  and  maintain  an  action  at  once  for  the  damages  occa- 
sioned by  such  repudiation,  without  awaiting  the  time  fixed  by  the 
contract  for  performance  by  the  defendant.  The  doctrine  has  been 
followed  in  the  English  courts  for  more  than  a  half  century. 

In  the  leading  case  of  Hochster  v.  De  la  Tour,  2  El.  &  B.  678, 
Justice  Crompton  said,  during  the  argument:  "When  a  party  announces 
his  intention  not  to  fulfil  the  contract,  the  other  side  may  take  him  at 
his  word  and  rescind  the  contract.  That  word  'rescind'  implies  that 
both  parties  have  agreed  that  the  contract  shall  be  at  an  end  as  if  it 
had  never  been.  But  I  am  inclined  to  think  that  the  party  may  also 
say :  'Since  you  have  announced  that  you  will  not  go  on  with  the  con- 
tract, I  will  consent  that  it  shall  be  at  an  end  from  this  time  (meaning, 
of  course,  for  purposes  of  further  performance)  ;  but  I  will  hold  you 
liable  for  the  damage  I  have  sustained;  and  I  will  proceed  to  make 
that  damage  as  little  as  possible  by  making  the  best  use  I  can  of  my 
liberty.'  This  is  the  principle  of  those  cases  in  which  there  has  been 
a  discussion  as  to  the  measure  of  damages  to  which  a  servant  is 
entitled  on  a  wrongful  dismissal." 

And  Lord  Campbell,  Chief  Justice,  in  delivering  judgment,  said: 
"It  seems  strange  that  the  defendant,  after  renouncing  the  contract 


252  COMMERCIAL   LAW    CASES 

and  absolutely  declaring  that  he  will  never  act  under  it,  should  be 
permitted  to  object  that  faith  is  given  to  his  assertion  and  that  an 
opportunity  is  not  left  to  him  of  changing  his  mind.  The  man  who 
wrongfully  renounces  a  contract  into  which  he  has  deliberately 
entered,  cannot  justly  complain  if  he  is  immediately  sued  for  a  com- 
pensation in  damages  by  the  man  whom  he  has  injured;  and  it  seems 
reasonable  to  allow  an  option  to  the  injured  party,  either  to  sue 
immediately  or  to  wait  till  the  time  when  the  act  was  to  be  done, 
still  holding  it  as  prospectively  binding  for  the  exercise  of  this  option, 
which  may  be  advantageous  to  the  innocent  party  and  cannot  be 
prejudicial  to  the  wrongdoer." 

The  same  rule  prevails  in  the  Supreme  Court  of  the  United 
States,  where  numerous  previous  decisions  of  the  same  court  are 
cited.  And  the  great  weight  of  authority  in  the  state  courts  is  to 
the  same  effect. 

So  far  as  observed,  the  only  states  dissenting  from  the  doctrine 
are  Massachusetts,  Nebraska  and  North  Dakota.  In  Daniels  v. 
Newton,  114  Mass.  530,  which  is  the  leading  case  upon  this  side  of 
the  question,  it  is  held  that  a  mere  refusal  of  performance  by  the 
promisor,  before  the  time  for  performance  arrives,  cannot  form  a 
ground  of  damages.  Even  in  Massachusetts  the  reasoning  on  which 
the  decision  in  Daniels  v.  Newton  was  based  is  hardly  carried  to  its 
logical  conclusion.  Upon  the  precise  point  now  presented,  however, 
the  authority  of  Daniels  v.  Newton  is  still  recognized  in  Massachusetts, 
as  appears  from  a  recent  decision  in  a  case  that  is  "on  all  fours"  with 
the  one  now  before  us. 

There  seems  to  be  no  controlling  decision  in  our  own  state,  at 
least  no  reported  case  that  is  precisely  in  point. 

Upon  the  whole  we  are  satisfied  that  the  doctrine  of  Hochster 
v.  De  la  Tour  is  well  founded  in  principle  as  well  as  supported  by 
authority.  We  are  also  clear  that  it  applies  to  such  a  contract  as 
the  one  in  suit ;  and  the  declaration  sets  forth  a  renunciation  so 
clear  and  unequivocal  as  to  give  ground  for  an  action,  it  being  averred 
that  the  defendant  has  declared  to  the  plaintiff  that  it  will  not  perform 
the  contract  and  has  refused  to  accept  the  monthly  assessments 
tendered  by  the  plaintiff  in  performance  of  conditions  precedent  on 
his  part. 

2.     Damages  for  Breach  During  Course  of  Performance. 

Parker  v.   Russell,    ijj  Mass.   7^. 

Parker  conveyed  land  to  the  defendant  under  an  agreement  that 
the  defendant  would  support  him  for  life.  The  defendant's  house 
was  destroyed  by  fire,  and  she  ceased  to  support  Parker,  who  now 
claims  damages  for  a  breach  of  the  entire  contract. 

Held,  that  damages  for  a  breach  of  the  contract  during  a  time 
when  the  plaintiff  is  entitled  to  performance  will  be  allowed  for 
future  as  well  as  past  effects  of  the  breach. 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  253 

Field,  J. 

If  the  breach  has  been  such  that  the  plaintiff  has  the  right  to 
treat  the  contract  as  absolutely  and  finally  broken  by  the  defendant, 
and  he  elects  so  to  treat  it,  the  damages  are  assessed  as  of  a  total 
breach  of  an  entire  contract. 

When  the  defendant,  for  example,  absolutely  refuses  to  perform 
such  a  contract  after  the  time  for  entering  upon  the  performance  has 
begun,  it  would  be  a  great  hardship  to  compel  the  plaintiff  to  be 
ready  at  all  times  during  his  life  to  be  supported  by  the  defendant, 
if  the  defendant  should  at  any  time  change  her  mind;  and  to  hold 
that  he  must  resort  to  successive  actions  from  time  to  time  to  obtain 
his  damages  piecemeal,  or  else  leave  them  to  be  recovered  as  an 
entirety  by  his  personal  representatives  after  his  death. 

Daniels  v.  Newton,  114  Mass.  530,  decides  that  an  absolute  refusal 
to  perform  a  contract  before  the  performance  is  due  by  the  terms 
of  the  contract  is  not  a  present  breach  of  the  contract  for  which  any 
action  can  be  maintained ;  but  it  does  not  decide  that  an  absolute 
refusal  to  perform  a  contract  after  the  time  and  under  the  conditions 
in  which  the  plaintiff  is  entitled  to  require  performance,  is  not  a 
breach  of  the  contract,  even  although  the  contract  is  by  its  terms  to 
continue  in  the  future. 

3.     Bankruptcy  as  Breach. 

Central  Trust  Co.  v.   Chicago  Auditorium  Association.   240 
U.  S.  581. 

The  Frank  E.  Scott  Transfer  Company  had  a  contract  with 
the  Chicago  Auditorium  Association  whereby  the  Transfer  Com- 
pany for  a  term  of  five  years  secured  the  baggage  and  livery 
privileges  of  the  Atiditorium  Hotel.  The  Transfer  Company  sub- 
sequently went  into  bankruptcy,  and  the  question  arises  in  banlc- 
ruptcy  proceedings  whether  the  Auditorium  Association  may 
claim  damages  for  breach  of  the  contract  catised  by  the  bankrtiptcy 
of  the  Transfer  Company. 

Held  that  bankruptcy  constitutes  a  breach  of  a  contract  ter- 
minated by  it. 

Pitney,  J. 

It  is  no  longer  open  to  question  in  this  court  that,  as  a  rule, 
where  a  party  bound  by  an  executory  contract  repudiates  his  obliga- 
tions or  disables  himself  from  performing  them  before  the  time  for 
performance,  the  promisee  has  the  option  to  treat  the  contract  as 
ended,  so  far  as  further  performance  is  concerned,  and  maintain  an 
action  at  once  for  the  damages  occasioned  by  such  anticipatory  breach. 
The  rule  has  its  exceptions,  but  none  that  now  concerns  us.     There. 


254  COMMERCIAL    LAW    CASES 

is  no  doubt  that  the  same  rule  must  be  applied  where  a  similar  re- 
pudiation or  disablement  occurs  during  performance.  Whether  the 
intervention  of  bankruptcy  constitutes  such  a  breach  and  gives  rise 
to  a  claim  provable  in  the  bankruptcy  proceedings  is  a  question  not 
covered  by  any  previous  decision  of  this  court,  and  upon  which  the 
other  federal  courts  are  in  conflict. 

"The  parties  to  a  contract  which  is  wholly  executory  have  a  right 
to  the  maintenance  of  the  contractual  relations  up  to  the  time  for 
performance,  as  well  as  to  a  performance  of  the  contract  when  due." 
Commercial  credits  are,  to  a  large  extent,  based  upon  the  reasonable 
expectation  that  pending  contracts  of  acknowledged  validity  will  be 
performed  in  due  course ;  and  the  same  principle  that  entitles  the 
promisee  to  continued  willingness  entitles  him  to  continued  ability 
on  the  part  of  the  promisor.  In  short,  it  must  be  deemed  an  implied 
term  of  every  contract  that  the  promisor  will  not  permit  himself, 
through  insolvency  or  acts  of  bankruptcy,  to  be  disabled  from  making 
performance ;  and,  in  this  view,  bankruptcy  proceedings  are  but  the 
natural  and  legal  consequence  of  something  done  or  omitted  to  be 
done  by  the  bankrupt,  in  violation  of  his  engagement.  It  is  the  pur- 
pose of  the  Bankruptcy  Act,  generally  speaking,  to  permit  all  creditors 
to  share  in  the  distribution  of  the  assets  of  the  bankrupt,  and  to  leave 
the  honest  debtor  thereafter  free  from  liability  upon  previous  obli- 
gations. Executory  agreements  play  so  important  a  part  in  the 
commercial  world  that  it  would  lead  to  most  unfortunate  results  if, 
by  interpreting  the  Act  in  a  narrow  sense,  persons  entitled  to  per- 
formance of  such  agreements  on  the  part  of  bankrupts  were  excluded 
from  participation  in  bankrupt  estates,  while  the  bankrupts  them- 
selves, as  a  necessary  corollary,  were  left  still  subject  to  action  for 
nonperformance  in  the  future,  although  without  the  property  or 
credit  often  necessary  to  enable  them  to  perform.  We  conclude  that 
proceedings,  whether  voluntary  or  involuntary,  resulting  in  an  adjudi- 
cation of  bankruptcy,  are  the  equivalent  of  an  anticipatory  breach  of 
an  executory  agreement. 


4.     Recovery  of  Penalty  for  Breach. 

Law  V.  Redditcli.  (1892)  i  Q.  B.  (Eng.)  izy. 

Law  agreed  to  construct  sewerage  works  for  the  town  of  Red- 
ditch  and  further  agreed  that  the  work  should  be  finished  by  a 
certain  date  or  he  should  forfeit  £100,  and  £5  a  week  for 
sucli  time  as  tiie  work  should  remain  uncompleted.  He  sues  for 
the  amount  due,  and  the  town  sets  up  a  claim  to  £160,  liquidated 
damages  for  failure  to  complete  within  the  specified  time. 

Held,  that  li(juidated  damages  are  to  be  distinguished  from 
penalties,  and  may  be  recovered  upon  non fulfilment  of  the  terms 
of  the  contract. 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  255 

Kay,  L.  J. 

This  contract  contains  a  provision  that  a  lump  sum  of  £100  and 
£5  for  every  seven  days  during  which  the  works  remain  incomplete 
after  April  30,  1889,  may  be  recovered  "as  and  for  liquidated  dam- 
ages." What  the  meaning  of  these  words  is,  and  why  they  were 
inserted  in  the  contract,  a  short  statement  of  the  law  on  the  subject 
may  assist  in  showing.  In  early  times  it  was  decided  by  courts  of 
equity  that,  where  a  sum  of  money  was  agreed  to  be  paid  as  penalty 
for  nonperformance  of  a  collateral  contract,  equity  would  not  allow 
the  whole  sum  to  be  recovered;  but,  where  the  damages  for  non- 
performance of  such  contract  could  be  estimated-,  would  cut  down 
the  penalty  to  the  amount  of  the  actual  damages  sustained.  It  was 
for  that  very  reason  that  the  words  "as  and  for  liquidated  damages," 
and  similar  words,  came  to  be  inserted  in  contracts.  The  contracting 
parties  meant  by  the  use  of  them  to  exclude  this  rule  of  equity,  and 
to  say  that  the  sum  agreed  upon  should  be  considered  not  to  be  a 
penalty,  but  the  amount  which  they  themselves  assess  as  being  the 
damages  which  would  be  incurred  in  the  event  of  the  contract  being 
broken.  It  was  to  avoid  the  interference  of  courts  of  equity  that 
such  words  were  introduced.  But  then  the  courts  of  law  interfered, 
and,  as  it  seems  to  me,  went  further  than  courts  of  equity  had, 
originally.  They  held  that,  though  the  parties  had  expressly  said 
that  the  sum  agreed  to  be  paid  was  liquidated  damages  and  not  a 
penalty,  they  would  construe  the  agreement  as  meaning  that  it  should 
be  a  penalty. 

Lopes,  L.  J. 

The  distinction  between  penalties  and  liquidated  damages  depends 
on  the  intention  of  the  parties  to  be  gathered  from  the  whole  of  the 
contract.  If  the  intention  is  to  secure  performance  of  the  contract 
by  the  imposition  of  a  fine  or  penalty,  then  the  sum  specified  is  a 
penalty;  but  if,  on  the  other  hand,  the  intention  is  to  assess  the 
damages  for  breach  of  the  contract,  it  is  liquidated  damages.  There 
is  a  canon  of  construction  which  has  been  referred  to  by  the  Master 
of  the  Rolls,  according  to  which,  if  the  sum  is  payable  on  the  happen- 
ing or  nonhappening  of  one  event,  it  is  to  be  regarded  as  liquidated 
damages;  but  if,  on  the  other  hand,  it  is  payable  on  the  happening 
of  several  events,  some  of  which  would  entail  very  trifling  damage, 
then  it  is  to  be  regarded  as  a  penalty.  For  the  purpose  of  applying 
that  rule  to  the  present  case,  it  is  necessary  first  to  construe  the 
contract.  The  material  words  are,  "the  works  shall  be  completed  in 
all  respects,  and  cleared  of  all  implements,  tackle,  impediments,  and 
rubbish,  on  or  before  April  30,  1889."  I  think  that  two  events  are 
here  contemplated,  one  being  the  completion  of  the  works,  the  other 
the  removal  of  the  tackle,  &c.  These  are  separate  matters.  Then 
the  contract  says,  that  "in  default  of  such  completion"  the  sums  in 
question  shall  become  payable.     In  my  view  those  words  do  not  refer 


256  COMMERCIAL    LAW    CASES 

to  the  clearance  of  the  works,  but  to  the  completion  of  the  works 
mentioned  in  the  first  part  of  the  clause.  According  to  the  construc- 
tion which  I  put  upon  the  contract,  only  one  event  is  contemplated  as 
that  upon  which  the  sums  mentioned  are  to  become  payable,  viz.,  the 
noncompletion  of  the  works  by  the  specified  day.  That  being  so, 
it  seems  to  me  that  those  sums  are  liquidated  damages. 


D.     Discharge  by  Impossibility. 

I.     When  Impossibility  of  Performance  Operates  as  a  Dis- 
charge. 

Piaggio  v.  Somerville.  up  Miss.  6. 

The  W.  A.  Powell  Transport  Company  secured  a  charter  of  the 

schooner  Henry  S.  Little  and  assigned  that  charter  to  Benn  & 
Company,  which  in  turn  assigned  to  Somerville.  Somerville  in 
his  turn  assigned  to  Piaggio  under  an  agreement  to  the  effect  that 
Piaggio  should  pay  $1500  for  the  assignment  upon  the  clearance 
of  the  vessel  at  Mobile.  Owing  to  the  unrestricted  submarine 
warfare  condticted  by  Germany,  the  owners  refused  to  let  the  ves- 
sel clear  and  paid  a  substantial  sum  to  Piaggio  in  settlement  of  his 
rights.  Somerville  now  sues  for  the  $1500,  and  Piaggio  defends 
on  the  ground  that  the  clearance  of  the  vessel  was  a  condition 
precedent  to  any  liability  to  the  plaintiff. 

Held,  that  performance  of  a  contract  is  not  excused  on  account 
of  war,  and  that  as  the  defendant  had  a  subsisting  contract,  there 
was  either  a  waiver  of  clearance  or  the  clearance  merely  indicated 
the  time  of  payment. 

Smith,  C.  J. 

The  contention  of  the  defendant  is  that  the  clearance  of  the 
schooner  Henry  S.  Little  at  Mobile  under  the  charter  party  is  a 
condition  precedent  to  any  obligation  on  his  part  to  pay  the  plaintiff 
the  money  sued  for,  to  which  the  plaintiff  replies  that  the  performance 
of  this  condition,  if  such  it  is,  was  waived  by  the  defendant  when 
he  accepted  the  seven  thousand  five  hundred  dollars  from  the  owners 
of  the  vessel,  and  released  them  from  furtiier  liability  to  him  under 
the  charter  party,  to  which  defendant  rejoins  that  his  acceptance  of 
the  money  and  release  of  the  owners  of  the  vessel  from  further 
liability  under  the  charter  party  cannot  be  construed  to  be  a  waiver 
of  the  condition  precedent  for  the  reason  that  he  could  not  have 
enforced  its  performance  had  he  tried  to  do  so;  the  owners  of  the 
vessel  having  i)ecn  released  from  the  obligation  of  the  charter  party 
because  of  the  danger  of  being  siuik  by  a  ( lernian  submarine  to  which 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  257 

the  vessel  would  have  been  subjected  had  it  attempted  to  make  the 
voyage. 

The  charter  party  contains  no  such  qualification  of  the  obligation. 
Consequently  the  owners  of  the  vessel  were  bound  to  transport  the 
cargo  of  lumber  as  provided  therein,  notwithstanding  the  risk  to  the 
vessel  of  being  sunk  by  a  submarine,  or  pay  damages  for  their  failure 
so  to  do,  for  the  rule  is  that  when  a  party  by  his  own  contract  creates 
a  duty  or  charge  upon  himself  he  is  bound  to  discharge  it,  although 
so  to  do  should  subsequently  become  unexpectedly  burdensome  or 
even  impossible;  the  answer  to  the  objection  of  hardship  in  all  such 
cases  being  that  it  might  have  been  guarded  against  by  a  proper 
stipulation. 

There  are,  however,  certain  classes  of  events  the  occurring  of 
which  are  said  to  excuse  from  performance  because  "they  are  not 
within  the  contract,"  for  the  reason  that  it  cannot  reasonably  be 
supposed  that  either  party  would  have  so  intended  had  they  contem- 
plated their  occurrence  when  the  contract  was  entered  into,  so  that 
the  promisor  cannot  be  said  to  have  accepted  specifically  nor  promised 
unconditionally  in  respect  to  them.  These  three  classes  are :  First, 
a  subsequent  change  in  the  law,  whereby  performance  becomes  unlaw- 
ful. Second,  the  destruction,  from  no  default  of  either  party,  of  the 
specific  thing,  the  continued  existence  of  which  is  essential  to  the 
performance  of  the  contract.  And,  third,  the  death  or  incapacitating 
illness  of  the  promisor  in  a  contract  which  has  for  its  object  the 
rendering  by  him  of  personal  services. 

The  case  at  bar  cannot  be  referred  to  any  of  these  classes,  and, 
in  order  for  it  to  be  brought  within  the  exceptions  to  the  rule  of 
absolute  liability,  it  will  be  necessary  for  us  to  add  thereto  a  fourth 
class,  to  wit,  a  subsequent  foreign  war  or  a  subsequent  change  by 
one  or  more  of  the  belligerents  in  the  method  of  waging  such  a  war 
which  renders  performance  more  burdensome  to  the  promisor  than 
when  the  contract  was  entered  into,  but  so  to  do  would  be  without 
the  reason  of  the  exception  and  contrary  to  the  authorities. 

There  are  a  few  cases  which  cannot  be  referred  to  any  of  the 
three  foregoing  classes,  such  as  The  Kronprinzessen  Cecilie,  244 
U.  S.  12,  which  is  erroneously  supposed  by  counsel  for  the  defendant 
to  sustain  his  contention.  In  that  case  a  German-owned  vessel  sailed 
from  New  York  to  Bremerhaven  via  Plymouth,  England,  and  Cher- 
bourg, France,  on  the  eve  of  the  outbreak  of  the  recent  war,  having 
on  board,  among  other  articles,  a  number  of  kegs  of  gold  consigned 
to  Plymouth  and  Cherbourg.  In  order  to  escape  capture  by  the  French 
or  English,  it  turned  back  before  reaching  either  of  the  last-named 
ports  and  returned  the  gold  to  the  shippers,  who  instituted  libels 
against  it  to  recover  the  damages  alleged  to  have  been  sustained  by 
them  because  of  its  failure  to  deliver  the  gold.  The  probabilities  of 
the  vessel's  capture,  had  it  continued  its  voyage  to  either  the  French 
or  the  English  port,  were  so  great  that  the  court  held  that  it  was 
justified  in  turning  back,  and  that  its  owners  were  thereby  excused 
from  performing  their  contract  to  transport  and  deliver  the  gold. 


258  COMMERCIAL    LAW    CASES 

for  the  reason  that  the  capture  of  the  vessel  was  a  risk  "which,  if 
it  had  been  dealt  with  (when  the  contract  of  shipment  was  made), 
it  cannot  be  beHeved  that  the  contractee  would  have  demanded  or  the 
contractor  would  have  assumed."  No  such  reason  can  be  assigned 
here  for  the  exclusion  from  the  contract  of  the  risk  which  the  Henry 
S.  Little  would  have  run  by  making  the  voyage  to  Italy  demanded 
by  the  defendant  when  we  remember  that  commerce  was  not  sus- 
pended because  of  Germany's  unrestricted  submarine  warfare ;  but, 
on  the  contrary,  vessels  owned  by  citizens  of  both  neutral  and  bel- 
ligerent countries  sailed  continuously  in  the  waters  in  which  that 
warfare  was  being  waged. 

2.     Impossibility  Created  by  War. 

Blackburn  Bobbin  Co.,  Ltd.,  v.  Allen  &  Sons,  Ltd.  (igi8)  i 
K.  B.  (Eng.)  540. 

Allen  &  Sons  contracted  to  deliver  to  the  Bobbin  Company 
Finland  birch  timber,  the  delivery  of  which  became  impossible 
upon  the  outbreak  of  the  war.  The  Bobbin  Company  sues  for 
damages.  The  defense  is  that  the  continuation  of  peace  was  an 
implied  term  of  the  contract. 

Held,  that  a  contract  is  not  discharged  by  impossibility  of  per- 
formance arising  from  a  state  of  war. 

McCardie,  J. 

The  question  at  issue  is  this:  When  will  a  change  of  circum- 
stances (not  due  to  the  default  of  either  party)  cause  a  dissolution 
of  contract?  The  law  upon  the  matter  is  undoubtedly  in  process  of 
evolution.  The  point  must  presumably  be  solved  upon  broad  existing 
principles  of  contract  law.  Those  principles,  I  conceive,  should  be 
the  same  whether  the  case  be  one  of  charter  party,  building  contract, 
or  sale  of  goods.  But  the  application  of  the  principles  may  vary 
with  the  terms  and  subject  matter  of  the  contract.  Is  there  a  conflict 
at  the  present  time  between  the  rules  which  are  relevant  to  the  present 
case  ?  The  original  rule  of  English  law  was  clear  in  its  insistence 
that  where  a  party  by  his  own  contract  creates  a  duty  or  charge 
ui)on  himself,  he  is  bound  to  make  it  good  notwithstanding  any 
accident  by  inevitable  necessity,  because  he  might  have  provided 
against  it  by  his  contract.  The  original  rule  has  again  and  again 
been  restated.  The  first  true  modification  of  the  original  rule  was 
created,  I  think,  by  the  doctrine  of  commercial  frustration.  "Where 
a  contract  is  made  with  reference  to  certain  anticipated  circumstances, 
and  where,  without  any  default  of  cither  party,  it  becomes  wholly 
inapi)lical)lc  to  or  im])ossiblc  of  ajjplication  to  any  such  circumstances, 
it  ceases  to  have  any  ai)plication ;  it  cannot  be  applied  to  other  cir- 
cimistanccs  which  could  not  have  been  in  the  contemplation  of  the 
parties   when   the   contract    was   made."     If   these    words   are   to   be 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  259 

applied  to  their  widest  extent  they  may  well  effect  a  revolution  of 
contract  law.  The  next  true  modification  of  the  original  rule  was 
finally  effected  by  the  decision  in  Taylor  v.  Caldwell,  3  B.  &  S.  826. 
There  the  contract  was  held  dissolved  by  the  destruction  of  its 
subject  matter.  The  doctrine  of  Taylor  v.  Caldwell  was  enlarged 
by  the  Coronation  cases,  of  which  Krell  v.  Henry,  (1903)  2  K.  B.  740, 
is  the  most  vivid  example,  for  in  Krell  v.  Henry  the  court  held  that  a 
collateral,  though  important,  circumstance  was  the  basis  of  the  con- 
tract between  the  parties,  and  that  when  the  basis  ceased  it  followed 
that  the  contract  was  dissolved. 

So  stood  the  decisions  at  the  outbreak  of  the  present  war.  Since 
that  event  judgments  have  been  delivered  as  to  the  true  effect  of 
the  decisions  I  have  stated.  On  the  one  hand  the  original  rule  has 
been  stated  to  exist  in  its  integrity,  whilst  on  the  other  hand  the 
modification  of  the  rule  is  deemed  to  be  clearly  settled. 

But  by  what  tests  and  subject  to  what  limitations  is  the  Krell  v. 
Henry  rule  to  be  applied?  No  indication  has  yet  been  given  as  to 
the  extent  of  its  operation.  At  the  outbreak  of  war  a  vast  body  of 
commercial  contracts  existed  which  contained  no  clauses  whatever 
providing  for  that  event.  No  one  can  doubt  that  such  contracts  had 
been  made  upon  the  assumption  that  peace  would  continue.  Neither 
side  contemplated  the  occurrence  of  war.  But  it  cannot  be  that  all 
such  contracts  were  dissolved  by  the  events  of  August,  1914.  The 
mere  continuance  of  peace  was  not  a  condition  of  the  contract.  The 
destruction  of  a  state  of  peace  is  not  of  itself  a  destruction  of  any 
specific  set  of  facts  within  the  Krell  v.  Henry  rule.  Nor  can  it  be 
that  grave  difficulty  on  the  part  of  a  vendor  in  procuring  the  contract 
articles  will  excuse  him  from  the  performance  of  his  bargain. 

To  supply  an  answer  to  the  above  questions  is  a  task  of  great 
difficulty  in  the  absence  of  any  authoritative  guidance,  for  it  calls  not 
only  for  a  reconciliation  of  apparently  conflicting  lines  of  cases,  but 
it  calls  also  for  the  ever  embarrassing  duty  of  deciding  whether  an 
implied  term  shall  be  read  into  a  given  contract  to  the  effect  that 
dissolution  shall  take  place  if  an  uncontemplated  and  serious  change 
of  circumstances  occurs.  The  decisions  with  respect  to  personal 
services  throw,  I  feel,  but  little  light  on  the  matter,  for  it  seems  just 
and  reasonable  to  imply  a  condition  in  such  agreements  that  the  con- 
tract shall  be  dissolved  upon  the  death  or  physical  incapacity  of  the 
person  who  has  agreed  to  give  his  personal  services.  Death  and  illness 
are  unceasing  features  of  human  society.  I  think,  however,  that 
assistance  is  derived  from  considering  broadly  the  nature  of  the  cases 
in  which  the  Krell  v.  Henry  rule  has  been  applied,  whether  before 
or  after  that  decision  in  1903.  It  will  be  observed  that  they  appa- 
rently fall  into  several  classes :  First,  where  British  legislation  or 
Government  intervention  has  removed  the  specific  subject  matter  of 
the  construction  from  the  scope  of  private  obligation.  I  myself  ven- 
ture to  think  that  this  is  an  independent  class  of  case,  though,  for 
the  purpose  of  clearness,  I  classify  it  as  falling  within  Krell  v.  Henry; 
secondly,  where  the  actual  and  specific  subject  matter  of  the  contract 


26o  COMMERCIAL    LAW    CASES 

has  ceased  to  exist,  apart  from  British  legislation  or  administrative 
intervention;  thirdly,  where  a  specific  set  of  facts  directly  affecting 
a  specific  subject  matter  has  ceased  to  exist  (see  Jackson  v.  Union 
Marine  Insurance  Co.,  L.  R.  lo  C.  P.  125,  the  case  of  a  ship) ; 
fourthly,  where  a  specific  set  of  facts  collaterally  only  affecting  a 
specific  subject  matter,  but  yet  constituting  the  basis  of  contract,  has 
ceased  to  exist  (see  Krell  v.  Henry,  (1903)  2  K.  B.  740,  the  letting  of 
specific  premises);  and,  fifthly,  where  British  administrative  inter- 
vention has  so  directly  operated  upon  the  fulfilment  of  a  contract  for 
a  specific  work  as  to  transform  the  contemplated  conditions  of  per- 
formance. I  need  not,  of  course,  classify  or  illustrate  the  cases  in 
which  British  legislation  has  directly  prohibited  the  performance  of 
a  contract.  In  such  cases  the  doctrine  of  illegality  dissolves  the 
bargains. 

My  conclusion  upon  the  matter  is  that  in  the  absence  of  any 
question  as  to  trading  with  the  enemy,  and  in  the  absence  also  of  any 
administrative  intervention  by  the  British  Government  authorities, 
a  bare  and  unqualified  contract  for  the  sale  of  unascertained  goods 
will  not  (unless  most  special  facts  compel  an  opposite  implication)  be 
dissolved  by  the  operation  of  the  principle  of  Krell  v.  Henry,  even 
though  there  has  been  so  grave  and  unforeseen  a  change  of  circum- 
stance as  to  render  it  impossible  for  the  vendor  to  fulfil  his  bargain. 
If  I  were  to  hold  otherwise,  I  should  create  a  rule  the  results  of  which 
no  man  can  foresee,  and  to  the  operation  of  which  no  judge  can 
satisfactorily  fix  the  limits. 


3.     Discharge  by  Impossibility  of  Performance  Arising  from 
Destruction  of  the  Subject  Matter. 

Butter  field  v.  Byron.   755  Mass.  5/7. 

Butterfield  made  a  contract  with  Byron  whereby  Byron  agreed 
to  build  a  hotel  on  land  belonging  to  Butterfield,  Butterfield  doing 
the  excavating,  brick  work,  painting  and  plumbing.  The  hotel 
was  struck  by  lightning  and  burned  to  the  ground  jtist  before  com- 
pletion. Butterfield  sues  to  recover  the  amounts  he  had  already 
paid  Byron  and  expended  upon  the  property. 

Held,  that  when  a  contract  becomes  impossible  of  performance 
by  reason  of  the  destruction  of  the  subject  matter,  it  is  dis- 
charged. 

Knowlton,  J. 

It  is  well  established  law,  that,  where  one  contracts  to  furnish 
labor  and  materials,  and  construct  a  chattel  or  build  a  house  on  land 
of  another,  he  will  not  ordinarily  be  excused  from  performance  of 
his  contract  by  the  destruction  of  the  chattel  or  building,  without  his 
fault,  before  the  time  fixed  for  the  delivery  of  it.     It  is  equally  well 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  26 1 

settled,  that  when  work  is  to  be  done  under  a  contract  on  a  chattel 
or  building  which  is  not  wholly  the  property  of  the  contractor,  or  for 
which  he  is  not  solely  accountable,  as  where  repairs  are  to  be  made 
on  the  property  of  another,  the  agreement  on  both  sides  is  upon 
the  implied  condition  that  the  chattel  or  building  shall  continue  in 
existence,  and  the  destruction  of  it  without  the  fault  of  either  of 
the  parties  will  excuse  performance  of  the  contract,  and  leave  no 
right  of  recovery  of  damages  in  favor  of  either  against  the  other. 
In  such  cases,  from  the  very  nature  of  the  agreement  as  applied  to 
the  subject  matter,  it  is  manifest  that,  while  nothing  is  expressly  said 
about  it,  the  parties  contemplated  the  continued  existence  of  that  to 
which  the  contract  relates.  The  implied  condition  is  a  part  of  the 
contract,  as  if  it  were  written  into  it,  and  by  its  terms  the  contract 
is  not  to  be  performed  if  the  subject  matter  of  it  is  destroyed,  without 
the  fault  of  either  of  the  parties,  before  the  time  for  complete 
performance  has  arrived. 

The  fundamental  question  in  the  present  case  is.  What  is  the  true 
interpretation  of  the  contract?  Was  the  house  while  in  the  process 
of  erection  to  be  in  the  control  and  at  the  sole  risk  of  the  defendant, 
or  was  the  plaintiff  to  have  a  like  interest,  as  the  builder  of  a  part 
of  it? 

What  are  the  rights  of  the  parties  in  regard  to  what  has  been 
done  in  part  performance  of  a  contract  in  which  there  is  an  implied 
condition  that  the  subject  to  which  the  contract  relates  shall  continue 
in  existence,  and  where  the  contemplated  work  cannot  be  completed 
by  reason  of  the  destruction  of  the  property  without  fault  of  either 
of  the  parties,  is  in  dispute  upon  the  authorities.  The  decisions  in 
England  differ  from  those  of  Massachusetts,  and  of  most  of  the  other 
states  of  this  country.  There  the  general  rule,  stated  broadly,  seems 
to  be  that  the  loss  must  remain  where  it  first  falls,  and  that  neither 
of  the  parties  can  recover  of  the  other  for  anything  done  under  the 
contract.  In  England,  on  authority,  and  upon  original  grounds  not 
very  satisfactory  to  the  judges  of  recent  times,  it  is  held  that  freight 
advanced  for  the  transportation  of  goods  subsequently  lost  by  the 
perils  of  the  sea  cannot  be  recovered  back.  In  the  United  States 
and  in  Continental  Europe  the  rule  is  different.  In  England  it  is 
held  that  one  who  has  partly  performed  a  contract  on  property  of 
another  which  is  destroyed  without  the  fault  of  either  party,  can 
recover  nothing;  and  on  the  other  hand,  that  one  who  has  advanced 
payments  on  account  of  labor  and  materials  furnished  under  such 
circumstances  cannot  recover  back  the  money.  One  who  has  ad- 
vanced money  for  the  instruction  of  his  son  in  a  trade  cannot  recover 
it  back  if  he  who  received  it  dies  without  giving  the  instruction. 
But  where  one  dies  and  leaves  unperformed  a  contract  which  is 
entire,  his  administrator  may  recover  any  instalments  which  were 
due  on  it  before  his  death. 

In  this  country,  where  one  is  to  make  repairs  on  a  house  of 
another  under  a  special  contract,  or  is  to  furnish  a  part  of  the  work 
and   materials   used   in  the   erection   of    a   house,   and   his   contract 


262  COMMERCIAL    LAW    CASES 

becomes  impossible  of  performance  on  account  of  the  destruction 
of  the  house,  the  rule  is  uniform,  so  far  as  the  authorities  have 
come  to  our  attention,  that  he  may  recover  for  what  he  has  done 
or  furnished.  In  Cleary  v.  Sohier,  120  Mass.  210,  the  plaintiff  made 
a  contract  to  lath  and  plaster  a  certain  building  for  forty  cents  per 
square  yard.  The  building  was  destroyed  by  fire  which  was  an 
unavoidable  casualty.  The  plaintiff  had  lathed  the  building  and  put 
on  the  first  coat  of  plaster,  and  would  have  put  on  the  second  coat, 
according  to  his  contract,  if  the  building  had  not  been  burned.  He 
sues  on  an  implied  assumpsit  for  work  done  and  materials  found. 
It  was  agreed  that,  if  he  was  entitled  to  recover  anything,  the 
judgment  should  be  for  the  price  charged.  It  was  held  that  he  could 
recover.  In  Hollis  v.  Chapman,  36  Texas  i,  and  in  Clark  v.  Franklin, 
7  Leigh  I,  the  recovery  was  a  proportional  part  of  the  contract  price. 
If  the  owner  in  such  a  case  has  paid  in  advance,  he  may  recover 
back  his  money,  or  so  much  of  it  as  was  an  overpayment.  The 
principle  seems  to  be  that  when,  under  an  implied  condition  of  the 
contract,  the  parties  are  to  be  excused  from  performance  if  a  certain 
event  happens,  and  by  reason  of  the  happening  of  the  event  it 
becomes  impossible  to  do  that  which  was  contemplated  by  the  contract, 
there  is  an  implied  assumpsit  for  what  has  properly  been  done  by 
either  of  them,  the  law  dealing  with  it  as  done  at  the  request  of 
the  other,  and  creating  a  liability  to  pay  for  it  its  value,  to  be  deter- 
mined by  the  price  stipulated  in  the  contract,  or  in  some  other  way 
if  the  contract  price  cannot  be  made  applicable.  Where  there  is  a 
bilateral  contract  for  an  entire  consideration  moving  from  each  party, 
and  the  contract  cannot  be  performed,  it  may  be  held  that  the 
consideration  on  each  side  is  the  performance  of  the  contract  by 
the  other,  and  that  a  failure  completely  to  perform  it  is  a  failure  of 
the  entire  consideration,  leaving  each  party,  if  there  has  been  no 
breach  or  fault  on  either  side,  to  his  implied  assumpsit  for  what  he 
has  done. 


4.     Discharge  by  Subsequent  Illegality. 

Heart  v.  East  Tennessee  Bren*ing  Company.  121  Tenn.  6g. 

In  1902,  Heart  leased  property  in  Knoxville  to  the  Brewing 
Company  for  a  term  of  eight  years  to  be  used  as  a  saloon.  In 
1907,  the  sale  of  intoxicating  liquor  was  prohibited  in  Knoxville 
from  and  after  Nov.  i.     Heart  sues  for  rent  accruing  after  Nov.  i. 

Held,  that  he  cannot  recover  for  the  reason  that  when  per- 
formance of  a  contract  becomes  illegal,  each  party  thereto  is  dis- 
charged from  further  obligation  thereunder. 

Shields,  J. 

It  is  a  principle  of  general  application  that  all  contracts  are  void 


OPERATION    AND    DISCHARGE    OF    CONTRACTS  263 

which  provide  for  doing  a  thing  which  is  contrary  to  law,  moraHty, 
and  pubUc  pohcy. 

It  has  been  apphed  to  contracts  of  this  character,  and  held,  for 
that  reason,  that  the  rent  contracted  to  be  paid  could  not  be  col- 
lected. 

The  rule  is  the  same  when  the  purpose  of  the  contract,  although 
lawful  when  made,  becomes  unlawful  by  statute  enacted  before  the 
full  performance  of  its  terms. 

That  the  illegality  of  a  contract  is  in  general  a  perfect  defense 
must  be  too  obvious  to  need  illustration.  It  may  indeed  be  regarded 
as  an  impossibility  by  act  of  law ;  and  it  is  put  upon  the  same  footing 
as  an  impossibility  by  act  of  God,  because  it  would  be  absurd  for  the 
law  to  punish  a  man  for  not  doing,  or,  in  other  words,  to  require  him 
to  do  that  which  it  forbids  his  doing.  Therefore,  if  one  agrees  to 
do  a  thing  which  is  lawful  for  him  to  do,  and  it  becomes  unlawful 
by  an  act  of  the  legislature,  the  act  avoids  the  promise,  and  so  if 
one  agrees  not  to  do  that  which  he  may  lawfully  abstain  from  doing, 
but  a  subsequent  act  requires  him  to  do,  this  act  also  avoids  the 
agreement. 

Where  the  performance  of  an  executory  agreement  which  was 
lawful  in  its  inception  is  made  unlawful  by  subsequent  enactment, 
the  agreement  is  thereby  dissolved  and  the  parties  discharged  from 
its  obligations. 

The  rule  has  also  been  frequently  applied  by  this  and  other  courts 
of  last  resort.  In  Railroad  Company  v.  Green,  9  Heisk.  592,  it  was 
held  that  a  contract  for  the  payment  of  Confederate  notes,  lawful 
when  made,  but  afterwards  made  unlawful  by  law,  could  not  be 
enforced.     It  is  there  said : 

"The  law  has  therefore  made  it  impossible  for  the  plaintiff  to 
perform  that  portion  of  the  condition  precedent  which  required  them 
to  demand  payment  in  Confederate  notes.  The  nonperformance  of 
a  contract  will  always  be  excused  where  it  is  occasioned  by  act  of 
law." 

The  case  of  Gray  v.  Sims,  Fed.  Cas.  No.  5729,  is  directly  in  point. 
This  was  a  suit  upon  a  policy  of  marine  insurance.  The  vessel  in- 
sured was  to  be  employed  in  importing  goods  from  Calcutta  or  Madras 
into  the  United  States,  and  the  contract  of  insurance  specified  this  as 
one  of  the  purposes  of  the  voyage.  After  the  policy  was  written, 
and  before  the  return  of  the  vessel,  it  became  by  act  of  congress 
illegal  to  import  goods  into  the  United  States  from  these  points. 
The  master  undertook  to  do  so.  and  the  ship  was  seized  and  con- 
fiscated. The  loss  was  within  the  terms  of  the  policy.  A  recovery 
was  denied.     The  court  said: 

"But  if  the  contract  be  legal  when  it  is  made,  and  the  performance 
of  it  is  rendered  illegal  by  a  subsequent  law,  the  parties  are  both  of 
them  discharged  from  its  obligation.  The  insured  loses  his  indemnity 
and  the  insurer  his  premium." 


264  COMMERCIAL    LAW    CASES 

E.     Discharge  by  Operation  of  Law. 
I.     Merger. 

Witheck  V.  Waine.    16  N.  Y.  5^2. 

Witbeck  bought  land  from  Waine  under  an  agreement  in  writ- 
ing which  provided  that  the  price  should  be  increased  or  reduced 
pro  rata,  as  the  farm  contained  more  or  less  than  130  acres.  A 
deed  was  given  containing  no  statement  as  to  this  contract.  Wit- 
beck  sues  to  recover  the  proportionate  amount  of  the  price  paid  as 
the  farm  contained  less  than  130  acres.  Waine  contends  that  the 
original  contract  was  merged  in  the  deed. 

Held,  that  a  contract  is  ordinarily  merged  in  a  subsequently 
executed  deed,  but  the  rule  applies  only  when  the  contract  relates 
to  the  same  subject  matter. 

Denio,  J. 

Unless  there  is  a  sound  distinction  between  the  present  case  and 
those  which  were  referred  to  by  the  defendant's  counsel,  we  must 
hold  the  law  to  be  that  the  delivery  and  acceptance  of  the  conveyance 
canceled  and  extinguished  the  prior  executory  agreement,  and  that  it 
cannot  be  any  longer  resorted  to  to  ascertain  the  terms  upon  which  the 
land  was  sold.  It  is  a  general  rule  of  evidence,  as  well  settled  as  it 
is  salutary,  that  a  written  contract  executed  between  parties  super- 
sedes all  their  prior  negotiations  and  agreements  upon  the  same 
subject.  This  is  especially  true  where  the  final  contract  is  an 
executed  one,  and  those  which  preceded  it  were  in  their  nature 
executory  and  looked  for  their  consummation  to  a  conveyance  after- 
wards to  be  made.  The  rule,  however,  is  not  applicable  where  the 
last  contract  covers  only  a  part  of  the  subjects  embraced  in  the  prior 
one.  Where,  for  example,  one  contracts,  for  a  specified  consideration, 
to  convey  land  at  a  future  time,  and  to  do,  at  a  still  later  period, 
other  acts  for  the  benefit  of  the  other  contracting  party,  or  where 
the  contract  is  for  a  series  of  acts  to  be  performed  at  successive 
periods,  it  is  plain  that  the  prior  contract  is  superseded  only  as  to 
such  of  its  provisions  as  are  covered  by  the  conveyance  made  pur- 
suant to  its  terms.  The  agreement  remains  in  full  force  as  to  all 
its  other  provisions.  This  is  so  obvious,  upon  the  reason  of  the  thing, 
that  we  need  not  ask  for  authority  to  sustain  it. 

I  think,  moreover,  that  the  authorities  which  are  relied  on  are 
clearly  distinguishable  from  the  present  case. 

In  the  case  before  us  the  plaintiff's  stipulations  respecting  the 
unpaid  portions  of  the  purchase  money  remained,  and  were  intended 
to  remain,  unaffected;  and  the  provision  for  adjusting  that  purchase 
money  according  to  the  actual  contents  of  the  farm  was  inseparably 
connected  with  and  naturally  formed  a  part  of  the  covenants  for  its 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  265 

payment.  I  conclude,  therefore,  that  the  fact  of  the  conveyance  of 
the  farm  did  not  preclude  the  plaintiff  from  subsequently  claiming 
a  proper  deduction  on  account  of  the  deficiency  of  the  land. 


2.    Alteration. 

Wood  V.  Steele.  6  Wall.  (U.  S.)  80. 

Newson  secured  a  loan  of  money  from  Wood  upon  a  note 
made  by  himself  and  Steele.  After  Steele  had  signed  the  note, 
the  date  was  changed  from  Sept.  11  to  October  11,  without  the 
knowledge  of  Steele,  who  contends  that  the  alteration  releases  him 
from  liability. 

Held,  that  a  material  alteration  of  a  contract  discharges  it  by 
operation  of  law. 

Swayne,  J . 

It  was  a  rule  of  the  common  law  as  far  back  as  the  reign  of 
Edward  III,  that  a  rasure  in  a  deed  avoids  it.  In  Master  v.  Miller, 
4  Term.  320,  the  subject  was  elaborately  examined  with  reference 
to  commercial  paper.  It  was  held  that  the  established  rules  apply 
to  that  class  of  securities  as  well  as  to  deeds.  It  is  now  settled,  in 
both  English  and  American  jurisprudence,  that  a  material  alteration 
in  any  commercial  paper,  without  the  consent  of  the  party  sought  to 
be  charged,  extinguishes  his  liability.  The  materiality  of  the  altera- 
tion is  to  be  decided  by  the  court.  The  question  of  fact  is  for  the 
jury.  The  alteration  of  the  date,  whether  it  hasten  or  delay  the 
time  of  payment,  has  been  uniformly  held  to  be  material.  The  fact 
in  this  case  that  the  alteration  was  made  before  the  note  passed  from 
the  hands  of  Newson,  cannot  affect  the  result.  He  had  no  authority 
to  change  the  date. 

The  grounds  of  the  discharge  in  such  case  are  obvious.  The 
agreement  is  no  longer  the  one  into  which  the  defendant  entered. 
Its  identity  is  changed:  another  is  substituted  without  his  consent; 
and  by  a  party  who  had  no  authority  to  consent  for  him.  There  is  no 
longer  the  necessary  concurrence  of  minds.  If  the  instrument  be 
under  seal,  he  may  well  plead  that  it  is  not  his  deed;  and  if  it  be 
not  under  seal,  that  he  did  not  so  promise.  In  either  case,  the  issue 
must  necessarily  be  found  for  him.  To  prevent  and  punish  such 
tampering,  the  law  does  not  permit  the  plaintiff  to  fall  back  upon 
the  contract  as  it  was  originally.  In  pursuance  of  a  stern  but  wise 
policy,  it  annuls  the  instrument,  as  to  the  party  sought  to  be  wronged. 

The  rules,  that  where  one  of  two  innocent  persons  must  suffer, 
he  who  has  put  it  in  the  power  of  another  to  do  the  wrong,  must  bear 
the  loss,  and  that  the  holder  of  commercial  paper  taken  in  good  faith 
and  in  the  ordinary  course  of  business,  is  unaffected  by  any  latent 
infirmities  of  the  security,  have  no  application  in  this  class  of  cases. 


266  COMMERCIAL    LAW    CASES 

The  defendant  could  no  more  have  prevented  the  alteration  than  he 
could  have  prevented  a  complete  fabrication;  and  he  had  as  little 
reason  to  anticipate  one  as  the  other.  The  law  regards  the  security, 
after  it  is  altered,  as  an  entire  forgery  with  respect  to  the  parties 
who  have  not  consented,  and  so  far  as  they  are  concerned,  deals 
with  it  accordingly. 


3.     Death. 

Siler,  Adm'r.  v.  Gray,  Adin'r.  86  N.  C.  566. 

J.  R.  Siler  conveyed  property  to  his  son,  L.  F.  Siler,  in  con- 
sideration of  which  the  son  agreed  to  support  his  father  and 
mother  as  long  as  they  should  live.  After  the  death  of  both  father 
and  son,  the  plaintiff,  the  administrator  of  the  estate  of  J.  R. 
Siler,  sues  the  defendant,  the  administrator  of  the  estate  of  L.  F. 
Siler,  for  failure,  after  the  death  of  L.  F.  Siler,  to  support  the 
father  and  mother  prior  to  the  death  of  the  father,  and  the  mother 
thereafter. 

Held,  that  death  discharges  a  contract  which  contemplates  per- 
sonal services. 

Rufhn,  J. 

The  general  rule  unquestionably  is,  that  the  personal  represen- 
tatives of  a  party  are  bound  to  perform  all  his  contracts,  whether 
specially  named  in  them  or  not,  or  else  make  compensation  for  their 
nonperformance  out  of  his  estate.  But  to  this  there  is  the  exception, 
as  well  established  as  the  rule  itself,  of  all  such  contracts  as  require 
something  to  be  done  by  the  party  himself  in  person. 

"All  contracts  for  personal  service,  which  can  be  performed  only 
during  the  life  of  the  contracting  party,  are  subject  to  the  implied 
condition  that  he  shall  live  to  perform  them,  and  should  he  die,  his 
executor  is  not  liable  to  an  action  for  the  breach  of  contract  occasioned 
by  his  death." 

In  such  cases,  it  is  held  that  the  act  of  God  furnishes  an  excuse 
sufficient. 

Assuming  such  to  be  the  law,  under  which  does  the  case  at  bar 
fall  ?  The  general  rule,  or  the  exception  as  stated  ?  This  must 
depend  upon  the  intention  of  the  parties,  for  at  last,  it  is  in  every  case 
purely  a  question  as  to  their  intention. 

It  is  true  that  the  cases  put  down  in  the  books,  like  those  cited 
by  us,  are  generally  those  in  which  the  contracts  sued  on  have  been 
to  marry — to  teach  an  apprentice — to  render  services  as  an  author, 
or  as  a  doctor  or  a  lawyer — such  as  will  be  determined  by  the  very 
nature  of  the  services  to  be  rendered  or  the  skill  requisite  to  perform 
them,  to  the  exclusion  of  all  thought  of  performance  by  any  other 
person  than  the  contracting  party. 


OPERATION    AND   DISCHARGE    OF    CONTRACTS  267 

But  Still  this  is  so,  even  in  contracts  of  that  nature,  because 
the  law  implies  such  to  have  been  the  intention  of  the  parties,  and  for 
that  reason,  and  that  alone,  construes  them  to  be  personal  contracts, 
and  takes  them  out  of  the  general  rule. 

If  in  the  lifetime  of  all  the  parties,  the  defendant's  intestate  had 
sought  to  introduce  a  stranger  into  the  family,  and  through  his  agency 
to  have  performed  the  services  stipulated  to  be  rendered  by  himself, 
can  it  be  supposed  that  the  law  would,  for  one  moment,  have  tolerated 
such  a  course?  And  if  not.  then  should  the  law,  after  his  death, 
furnish  a  substitute  for  him,  in  his  administrator,  when  he,  himself, 
could  not  appoint  one?  We  think  not;  and  for  the  reason  that  the 
parties  to  the  contract,  manifestly,  never  contemplated  or  intended  that 
there  should  be  one. 

Our  conclusion  is  therefore  that  so  much  of  said  agreement  as 
imposed  upon  the  defendant's  intestate  the  duty  of  providing  for  the 
plaintiff's  intestate  and  his  wife,  and  of  looking  after  their  comfort, 
was  purely  personal  in  its  nature,  and  inasmuch  as  the  defendant  could 
not  have  enforced  his  right  to  perform  it,  so  neither  is  he  liable  to 
an  action  for  not  having  done  so. 


4.     Bankruptcy. 

Zaz'elo  V.  Reeves.   22^  U.  S.  62^. 

Reeves  sues  Zavelo  upon  a  debt,  a  portion  of  which  had  been 
discharged  by  a  composition  with  creditors  made  by  Zavelo  in 
the  course  of  bankruptcy  proceedings,  in  which  Reeves  joined. 
Reeves  had  loaned  Zavelo  $500  for  the  purpose  of  eflfecting  that 
composition,  upon  a  promise  by  Zavelo  to  pay  the  balance  as  part 
consideration  for  the  loan. 

Held,  that  a  new  promise  made  during  bankruptcy  proceedings 
revives  a  debt  otherwise  discharged  by  operation  of  law. 

Pitney,  J. 

It  is  contended  that  although  a  debt  barred  by  discharge  in  bank- 
ruptcy may  be  revived  by  a  new  promise  made  after  the  discharge, 
this  cannot  be  done  by  a  new  promise  made  in  the  interim  between 
the  adjudication  and  the  discharge. 

It  is  settled,  however,  that  a  discharge,  while  releasing  the  bank- 
rupt from  legal  liability  to  pay  a  debt  that  was  provable  in  the 
bankruptcy,  leaves  him  under  a  moral  obligation  that  is  sufficient  to 
support  a  new  promise  to  pay  the  debt.  And  in  reason,  as  well  as 
by  the  greater  weight  of  authority,  the  date  of  the  new  promise  is 
immaterial.  The  theory  is  that  the  discharge  destroys  the  remedy 
but  not  the  indebtedness ;  that,  generally  speaking,  it  relates  to  the 
inception  of  the  proceedings,  and  the  transfer  of  the  bankrupt's  estate 
for  the  benefit  of  creditors  takes  effect  as  of  the  same  time ;  that  the 


268  COMMERCIAL    LAW    CASES 

bankrupt  becomes  a  free  man  from  the  time  to  which  the  discharge 
relates,  and  is  as  competent  to  bind  himself  by  a  promise  to  pay  an 
antecedent  obligation,  which  otherwise  would  not  be  actionable 
because  of  the  discharge,  as  he  is  to  enter  into  any  new  engagement. 
And  so,  under  other  bankrupt  acts,  it  has  been  commonly  held  that  a 
promise  to  pay  a  provable  debt,  notwithstanding  the  discharge,  is  as 
effectual  when  made  after  the  filing  of  the  petition  and  before  the 
discharge  as  if  made  after  the  discharge. 


Chapter  III. 
SALES. 

I. 

THE  CONTRACT  OF  SALE. 

The  law  of  sales  is  a  branch  of  the  law  of  contracts  subject 
to  special  rules  at  common  law  and  by  statute.  Most  of  the  great 
commercial  states*  have  adopted  the  Uniform  Sales  Act,  which 
embodies  in  statutory  form  the  main  principles  of  the  common 
law  and  tends  to  eliminate  conflict  of  decisions.  This  chapter 
will  in  general  follow  the  terms  of  that  statute. 

A  sale  of  goods  is  an  agreement  whereby  the  seller  transfers 
the  title  to  goods  to  the  buyer  for  a  consideration  called  the  price. 
An  agreement  to  sell  is  distinguished  from  a  sale  in  that  a  sale 
represents  an  actual  transfer  of  title,  while  an  agreement  to  sell 
is  merely  a  contract  to  make  such  a  transfer  in  the  future.  A  sale 
gives  rights  against  the  goods  themselves,  while  an  agreement  to 
sell  gives  only  a  right  of  action  for  breach  of  contract. 

A  sale  involves  as  its  elements : 

1.  An  agreement. 

2.  A  transfer  of  property.  This  property  is  called  the 
title,  or  general  ownership.  It  is  to  be  distinguished 
from  that  special  title  which  belongs  to  anyone  who  law- 
fully has  goods  in  his  possession. 

3.  Goods.  Goods  include  all  personal  property  other  than 
things  in  action  and  money.  Things  in  action  is  a 
translation  of  the  old  legal  term,  "choses  in  action," 
which  means  rights  flowing  from  one  person  to  another. 

*  The  jurisdictions  which  have  adopted  the  Sales  Act  are  as  follows: 

Arizona                                         Michigan  Ohio 

Connecticut                                    Minnesota  Oregon 

Idaho                                                Mississippi  Pennsylvania 

Illinois                                             Nevada  Rhode  Island 

Iowa                                               New  Jersey  Tennessee 

Maryland                                        New  York  Utah 

Massachusetts                              North  Dakota  Wisconsin 

Wyoming  Alaska 

269 


2/0  COMMERCIAL   LAW    CASES 

4.  Price.  The  price  may  be  fixed  by  the  terms  of  the 
contract  or  may  be  left  to  be  fixed  in  such  manner  as 
may  later  be  agreed  upon.  It  may  be  determined  by  the 
course  of  dealing  between  the  parties.  Under  the  statute 
it  may  be  made  payable  in  any  personal  property. 

A  sale  is  to  be  distinguished  from  other  transactions  somewhat 
similar  in  nature : 

1.  Bailment.  A  bailment  is  the  delivery  of  an  article  of  per- 
sonal property  to  another  for  a  special  purpose,  with  the  under- 
standing that  it  is  to  be  returned  when  that  purpose  is  accomplished. 
The  bailee  has  a  special,  not  a  general,  property  in  the  goods. 
That  is  true  even  though  the  goods  are  to  be  returned  in  a  dif- 
ferent form.  A  difficult  question  arises  when  goods  are  entrusted 
to  another  on  the  understanding  that  they  may  be  mixed  with 
goods  belonging  to  other  persons,  with  an  agreement  for  the  return, 
not  of  the  specific  goods,  but  of  a  proportionate  part  of  the  mass. 
Some  courts  hold  that  such  a  transaction  is  a  sale,  on  the  theory 
that  the  agreement  does  not  require  the  return  of  the  goods  so 
deposited.  Other  courts  hold  that  it  is  a  bailment,  since  the  dif- 
ferent depositors  own  the  entire  mass  in  common.  Care  should 
be  taken  to  distinguish  between  a  bailment  with  an  option  to  buy, 
and  a  sale  or  contract  to  sell.  A  bailment  with  option  to  buy 
should  in  turn  be  distinguished  from  a  conditional  sale,  which  is 
a  contract  to  sell  accompanied  by  the  delivery  of  goods,  with  reser- 
vation of  the  title  in  order  to  secure  payment  of  the  price,  which 
the  buyer  is  bound  to  pay. 

2.  Pledge.  A  transfer  of  property  as  security  for  a  debt 
without  transfer  of  title,  is  a  pledge.  The  pledgor  may  still 
transfer  the  title  to  a  third  person,  subject  to  the  special  property 
of  the  pledgee.  If  goods  are  delivered  by  way  of  security,  it 
may  always  be  shown  that  the  real  intention  of  the  transaction 
was  to  pledge  and  not  to  sell,  even  though  the  form  is  that  of  a 
sale. 

3.  Chattel  Mortgage.  A  chattel  mortgage  differs  from  a 
pledge  in  that  the  general  property  in  the  mortgaged  goods  is 
transferred  to  the  mortgagee.  It  differs  from  a  sale  in  that  the 
title  reverts  to  the  mortgagor  upon  performance  of  the  condition. 

4.  Exchange.  If  the  consideration  for  a  transfer  of  the 
property  in  goods  is  other  property,  no  price  being  fixed  for  either, 
tiie  transaction  is  an  exchange  or  barter,  not  a  sale. 

5.  Contract  for  work,  labor  and  material.  The  distinction 
between  a  sale  of  goods  and  a  contract  to  do  work  or  furnish 
material  is  important  chiefly  in  reference  to  the  statute  of  frauds. 
Some  courts  hold  that  if  the  proi)erty  is  to  be  manufactured  espe- 
cially for  the  buyer  ujjon  liis  order,  and  is  not  such  as  the  seller 


SALES  271 

ordinarily  manufactures  for  the  general  market,  the  contract  is 
for  work,  labor,  and  material,  and  not  a  contract  to  sell.  Other 
courts  hold  that  such  a  contract  is  a  contract  to  sell  in  spite  of 
the  fact  that  the  vendor  must  furnish  materials  and  do  special  work 
for  the  vendee. 

The  ordinary  rules  of  the  law  of  contracts  as  to  offer  and  accep- 
tance, form,  consideration,  capacity,  reality  of  consent,  and  legal- 
ity of  subject  matter  apply  to  the  law  of  sales.  The  section  of  the 
statute  of  frauds  which  applies  to  these  contracts  is  the  seven- 
teenth section  of  the  old  English  Statute  of  Frauds,  which  in  the 
Sales  Act  is  as  follows :  "A  contract  to  sell  or  a  sale  of  any 
goods  or  choses  in  action  of  the  value  of  five  hundred  dollars 
or  upward  shall  not  be  enforceable  by  action  unless  the  buyer 
shall  accept  part  of  the  goods  or  choses  in  action  so  contracted 
to  be  sold,  or  sold  and  actually  receive  the  same,  or  give  some- 
thing in  earnest  to  bind  the  contract,  or  in  part  payment,  or 
unless  some  note  or  memorandum  in  writing  of  the  contract  or 
sale  be  signed  by  the  party  to  be  charged  or  his  agent  in  that  be- 
half." The  amount  of  money  involved  which  brings  a  sale  within 
the  statute  differs  with  the  different  states.  Under  the  early 
English  act,  it  was  ten  pounds,  and  many  of  the  states  originally 
adopted  the  sum  of  fifty  dollars.  The  amount  is  now  generally 
higher. 

In  all  the  states  which  have  enacted  the  Uniform  Sales  Act 
without  amendment,  this  amount  is  five  hundred  dollars.  A  dif- 
ferent sum  is  specified  in  the  statutes  of  the  following  states : 


Arkansas      1  Connecticut 

Maine 

Missouri 


100 


lCUt\<j. 

Maine  [-$30  Michigan     J^ 

|$20O 


New  Hampshire,  $33  California 

IT  ^  Nevada 

Vermont,  $40 

Maryland     ~|  Ohio,  $2500 

Mmnesota    [^ 
New  York  l^^o 
Wisconsin    J 

The  note  or  memorandum  required  must  be  signed  by  the  party 
to  be  charged,  and  must  state : 

1.  The  names  or  descriptions  of  the  parties; 

2.  The  price,  if  agreed  upon ; 

3.  The  nature  of  the  goods : 

4.  Other  material  terms  of  the  contract ; 

5.  Which  is  the  buyer  and  which  is  the  seller. 


2^2  COMMERCIAL    LAW    CASES 

It  is  sufficient  in  most  jurisdictions  that  the  party  who  is  to  be 
sued  upon  the  memorandum  shall  have  signed  his  name  to  it  by 
mark  or  initials  in  pencil,  printing,  or  otherwise,  but  some  states 
hold  that  the  memorandum  must  be  signed  by  both  parties,  on  the 
theory  that  unless  both  have  signed,  the  contract  is  void  for  want 
of  mutuality.  In  the  conception  of  these  courts,  the  party  who 
has  not  signed  should  have  no  right  of  action  against  the  party 
who  has  signed,  when  that  other  party  has  no  right  of  action 
against  him. 

Acceptance  is  the  assent  of  the  buyer  that  the  goods  are  taken 
by  him  under  the  contract,  and  indicates  his  intention  to  hold  the 
seller  to  the  contract.  In  the  case  of  a  sale  of  specific  goods,  the 
acceptance  ordinarily  takes  place  when  the  contract  is  made.  The 
buyer,  by  making  the  contract  for  the  special  goods,  indicates  his 
assent  to  take  them.  This  acceptance  becomes  conclusive  in  most 
jurisdictions  when  any  part  of  the  specified  goods  is  received.  In 
a  few  states,  even  in  such  cases  it  must  distinctly  appear  that  the 
goods  were  accepted  under  the  contract. 

Earnest  is  something  of  value,  not  a  part  of  the  price,  given 
to  indicate  the  assent  of  a  party  to  the  bargain.  It  is  rarely  recog- 
nized in  this  country,  for  part  payment  has  almost  completely 
taken  its  place.  Part  payment  is  something  of  value  which  is  part 
of  the  price,  given  to  indicate  the  assent  of  a  party  to  the  bargain. 
Earnest  or  part  payment  may  be  given  at,  or  subsequent  to,  the 
time  of  the  contract  of  sale,  and  in  some  states  may  be  delivered 
even  before  the  contract  itself  is  made. 


A.     The  Contract  of  Sale  in  General. 

I.     Definition. 

Gardner  v.  Latie.    12  Allen  (Mass.)  jp. 

Wonson  &  Brothers  owed  Gardner  about  $1300.  They  gave 
him  in  payment  a  bill  of  sale  covering  135  barrels  of  No.  i  mack- 
erel which  they  pointed  out  to  him,  whereupon  he  discharged  his 
claims  against  them.  No  delivery  was  made,  but  these  barrels 
were  marked  with  Gardner's  name  and  were  set  aside  for  him. 
Later,  Lane  seized  them  upon  an  execution  against  Wonson.  It 
turned  out  that  the  barrels  contained  two  grades  of  mackerel,  in- 
stead of  only  No.  i  grade  as  agreed,  and  that  some  of  them  con- 
tained nothing  but  salt.     Gardner  claims  title  to  the  property. 

Held,  that  a  sale  involves  the  elements  of  any  other  contract. 

Bigelow,  C.  J. 

The  question  at   issue   in  the  present   case   is   not   whether  the 


SALES  273 

property  in  certain  chattels  has  passed,  as  between  vendor  and  vendee, 
but  whether  a  purchaser  has  acquired  a  vaHd  title  thereto  as  against 
an  attaching  creditor  of  the  vendor.  It  often  happens  that  under  a 
contract  of  sale  a  title  may  pass  as  between  the  immediate  parties 
to  the  contract  which  cannot  be  set  up  to  defeat  the  rights  of  third 
persons.  For  example,  a  delivery  of  property  may  not  be  necessary 
to  vest  a  title  in  a  vendee  as  against  his  vendor,  but  it  is  always 
essential  to  pass  the  title  as  against  creditors  or  bona  fide  purchasers 
without  notice.  Upon  the  same  principle,  no  right  by  way  of  estoppel 
can  arise  in  favor  of  the  plaintiff  in  this  action,  on  the  ground  that 
the  original  owner  of  the  property  in  controversy  has  done  certain 
acts,  the  effect  of  which  is  to  preclude  him  from  asserting  any  title 
to  it  as  against  the  plaintiff.  Such  acts  might  avail  the  plaintiff,  if 
the  issue  was  between  him  and  his  vendor.  But  the  creditors  of  the 
latter  cannot  be  affected  by  them.  They  have  the  right  to  hold  the 
property  by  attachment  to  secure  their  debts,  unless  it  appears  that 
a  valid  sale  and  delivery  has  vested  a  legal  title  to  it  in  the  plaintiff. 
Besides,  the  effect  of  an  estoppel  siio  vigore  is  not  to  pass  a  title  to 
property,  but  to  preclude  a  party  from  setting  up  any  right  or  claim 
to  it.  A  debtor  cannot,  by  his  dealings  with  a  third  person  to  which 
his  creditor  is  neither  party  nor  privy,  shut  out  the  latter  from  his 
right  to  sequestrate  his  debtor's  property  by  attachment  and  execution. 
The  only  mode  in  which  such  right  can  be  defeated  is  by  proof  of  a 
valid  sale  and  delivery  under  and  by  virtue  of  which  a  title  to  the 
property  has  passed  to  and  become  vested  in  the  vendee  prior  to  the 
attachment  or  seizure  by  a  creditor. 

The  single  test  by  which  to  determine  which  of  the  two  parties 
to  this  action  has  the  better  title  to  the  property  in  dispute  is  to 
ascertain  whether  the  plaintiff's  evidence  shows  a  valid  sale  and 
delivery  to  him  prior  to  the  attachment  by  the  defendant.  The  solu- 
tion of  this  question  depends,  we  think,  on  the  most  elementary  prin- 
ciples, although  in  their  application  to  the  facts  in  proof  a  nice  dis- 
crimination may  be  required. 

The  ordinary  definition  of  a  sale,  as  a  transmutation  of  property 
from  one  person  to  another  for  a  price,  does  not  fully  express  the 
essential  elements  which  enter  into  and  make  up  the  contract.  A 
more  complete  enumeration  of  these  would  be,  competent  parties  to 
enter  into  a  contract,  an  agreement  to  sell,  and  the  mutual  assent  of 
the  parties  to  the  subject  matter  of  the  sale  and  to  the  price  to  be 
paid  therefor.  If  any  of  these  ingredients  be  wanting,  there  is  no 
sale.  Thus  it  cannot  be  doubted  that  if  under  a  contract  of  sale 
a  delivery  was  made,  through  mistake,  of  an  article  different  from 
that  agreed  upon  by  the  parties,  there  would  be  no  sale  of  the  article 
delivered,  and  no  property  in  it  would  pass,  for  the  simple  reason 
that  the  vendor  had  not  agreed  to  sell  nor  the  vendee  to  buy  it. 
There  would  in  fact  be  "no  contract  between  the  parties  in  respect  to 
the  article  actually  furnished" ;  or,  to  express  it  in  different  words, 
when  a  material  mistake  occurs  in  respect  to  the  nature  of  the  subject 


274  COMMERCIAL    LAW    CASES 

matter  of  a  sale,  there  is  no  mutual  assent,  and  therefore  the  contract 
is  void. 

Applying  this  principle  to  the  facts  proved  at  the  trial,  it  would 
seem  to  be  clear  that  no  title  passed  to  the  plaintiff  in  the  barrels  of 
salt  and  No.  3  mackerel,  because  he  made  no  agreement  for  the 
purchase  of  these  articles.  His  agreement  or  contract  of  sale  was 
for  articles  of  an  entirely  different  kind,  and  at  the  time  of  the 
attachment  he  did  not  know  that  the  articles  which  had  been  delivered 
to  him  were  not  the  same  in  kind  as  those  which  he  had  agreed  to 
purchase.  Nor  had  he  then  assented  to  receive  the  articles  delivered 
as  being  in  conformity  to,  or  in  pursuance  of,  his  previous  contract  of 
sale,  unless  it  can  be  said  that  a  party  assents  to  that  of  which  he 
has  no  knowledge. 

2.     Sale  and  Contract  to  Sell  Distinguished. 

Walti  V.  Gaba.  160  Cal.  ^24. 

Walti  and  another,  the  plaintiffs,  agreed  to  sell  to  Gaba  and 
another  a  spring  clip  of  wool  at  18c,  and  a  fall  clip  of  the  preced- 
ing year  at  14c,  per  pound.  At  the  time  of  making  the  contract, 
the  fall  wool  was  stored  in  a  warehouse,  but  the  spring  clip  had 
not  yet  been  made.  Two  hundred  and  fifty  dollars  was  paid  on 
account ;  the  balance  was  to  be  paid  on  delivery.  In  May,  shortly 
afterwards,  the  warehouse  was  burned  and  the  fall  clip  destroyed. 
The  plaintiffs  tender  the  spring  clip  and  demand  payment  in  full, 
which  the  defendants  refuse  to  make. 

Held,  that  the  transaction  was  a  contract  to  sell,  not  a  sale ; 
that,  therefore,  title  had  not  passed,  and  the  loss  must  fall  on 
the  seller. 

The  Court: 

Appellants'  theory  was  and  is  that  the  transaction  had  between 
them  and  defendants  was  an  absolute  sale,  and  that  title  passed  to 
all  the  wool  involved  at  the  time  the  memorandum  was  signed  by 
Walti  and  Bourdieu  and  the  $250  paid  by  Gaba  and  Magdison. 

If  this  theory  of  the  case  be  correct  it  is  certain  that  defendants 
should  bear  the  loss  of  the  destroyed  wool  and  should  pay  for  the 
entire  amount.  But  the  respondents  contend  that  the  transaction  con- 
stituted an  agreement  to  sell  and  to  buy  only,  and  that  no  title  passed 
at  the  execution  of  the  contract  or  would  pass  until  delivery  of  the 
wool. 

The  court  found  "That  the  plaintiffs  did  not  sell  and  the  de- 
fendants did  not  buy  any  wool  by  the  agreement  in  writing,  but  the 
plaintiffs  agreed  to  sell  and  the  defendants  agreed  to  buy  the  wool 
mentioned  in  the  agreement  in  writing  upon  the  terms  and  conditions 
therein  set  forth  and  contained,  and  that  the  agreement  in  writing 
constituted  and  was  one  entire  contract  by  which  the  defendants 
agreed  to  pay  the  balance  of  the  price  of  all  the  wool  therein  mentioned 


SALES  275 

upon  the  delivery  of  all  the  wool  therein  mentioned  by  the  plaintiffs, 
to  them,  the  defendants."  It  is  the  correctness  of  this  finding  that  is 
attacked. 

We  are  of  the  opinion  that  the  interpretation  adopted  by  the  court 
of  the  transaction  is  sufficiently  supported  by  the  writing  itself  and 
the  evidence  as  to  the  circumstances  and  conditions  surrounding  its 
execution. 

It  is  true  that  the  writing  states  that  "I  have  this  day  sold, 
etc.,"  but  the  use  of  the  word  sold  or  the  word  bought  does  not  always 
import  a  present  sale,  but  such  words  are  frequently  used  where  the 
parties  in  fact  intend  only  an  agreement  to  sell. 

If  the  contract  now  under  discussion  had  only  referred  to  spring 
wool,  which  was  still  growing  on  the  backs  of  the  sheep  at  the 
execution  of  the  contract,  and  had  then  still  to  be  fully  grown, 
sheared  and  delivered  at  Kings  City,  by  appellants,  there  could  hardly 
be  room  for  discussion  as  to  the  fact  that  no  title  passed  at  the  execu- 
tion of  the  contract.  The  rule  is  "Where  by  the  agreement  the  vendor 
is  to  do  anything  to  the  goods  for  the  purpose  of  putting  them  into 
that  state  in  which  the  purchaser  is  bound  to  accept  them,  or,  as  it  is 
sometimes  worded,  into  a  deliverable  state,  the  performance  of  those 
things  shall,  in  the  absence  of  the  circumstances  indicating  a  con- 
trary intention,  be  taken  to  be  a  condition  precedent  to  the  vesting  of 
property." 

The  court  was  justified  in  finding  that  the  contract  was  entire. 
The  circumstances  under  which  the  contract  was  executed  as  well 
as  the  wording  of  the  contract  indicate  that  it  was  an  entire  con- 
tract for  the  purchase  of  all  the  wool,  both  spring  wool  and  fall 
wool.  Under  the  contract  the  sellers  could  not  compel  acceptance 
and  payment  for  the  fall  wool,  unless  they  also  delivered  the  spring 
wool.  Neither  could  they  compel  payment  for  the  spring  wool  unless 
they  delivered  the  fall  wool. 

3.     Necessity  of  Agreement  on  Terms  of  Sale. 

Smnmers  v.  Mills.  21  Tex.  77. 

Summers  &  Company  ordered  goods  from  a  Boston  firm 
which  accepted  the  order  upon  conditions  which  appear  in  the 
opinion,  and  forwarded  the  goods.  Upon  finding  that  Summers' 
credit  was  not  good,  the  Boston  firm,  not  having  received  notes 
in  accordance  with  the  conditions  specified,  instructed  Mills,  then 
in  possession  of  the  goods,  not  to  deliver  them  to  Summers. 
Sununers  sues  Mills  for  failure  to  deliver. 

Held,  that  there  was  no  agreement  of  sale  as  the  plaintiflf  did 
not  accept  the  terms  of  the  contract. 

Wheeler,  J . 

There  must  be  a  contract  of  sale,  to  pass  the  property.  And 
there  is  no  contract  unless  the  parties  thereto  assent ;  and  they  must 


276  COMMERCIAL    LAW    CASES 

assent  to  the  same  thing  in  the  same  sense.  There  was,  in  this  case, 
a  proposal  to  purchase  and  an  acceptance  of  the  proposal,  but  the 
terms  of  the  sale  were  not  agreed  on.  In  the  proposal  to  purchase, 
nothing  was  said  respecting  terms ;  but  the  vendors  having  com- 
municated their  terms,  and  supposing  they  would  be  assented  to, 
shipped  the  goods  without  waiting  for  the  answer  containing  the 
vendee's  acceptance  of  them.  The  terms  were  never  accepted,  and 
there  was,  consequently,  no  contract  of  sale.  The  terms  proposed 
called  for  notes  payable  in  six  months  at  the  office  of  R.  &  D.  G. 
Mills,  in  Galveston,  with  exchange,  and,  if  a  further  extension  of 
time  was  required,  the  notes  should 'bear  interest  after  six  months. 
The  notes  returned,  in  reply,  were  made  payable  in  nine  and 
twelve  months  at  the  office  of  C.  Ennis  &  Co.  in  Houston,  with 
interest  at  seven  per  cent,  after  six  months,  and  without  exchange. 
This  was  not  an  acceptance  of  the  terms  proposed.  It  does  not 
matter  that  the  difference  of  terms  between  the  parties  may  not 
seem  to  be  very  material.  If  a  diversity  exists,  that  fact  is  enough. 
To  make  a  contract,  there  must  be  a  mutual  assent.  "The  assent  must 
comprehend  the  whole  of  the  proposition ;  it  must  be  exactly  equal  to 
its  extent  and  provisions,  and  it  must  not  qualify  them  by  any 
new  matter."  If  the  answer,  "either  in  words  or  effect,  departs  from 
the  proposition,  or  varies  the  terms  of  the  offer,  or  substitutes  for 
the  contract  tendered  one  more  satisfactory  to  the  respondent," 
there  is  no  assent  and  no  contract.  "If  a  proposition  be  accompanied 
with  certain  conditions  or  limitations,  the  acceptance  must  corre- 
spond to  it  exactly,  for  if  any  alteration  be  suggested,  or  any  ex- 
ception be  made  to  its  exact  terms,  the  provisional  acceptance  be- 
comes merely  a  new  proposition,  which  also  requires  an  acceptance. ' 
The  court  cannot  undertake  to  say  how  much  consequence  the  con- 
signors may  have  attached  to  the  condition  of  making  the  notes  pay- 
able at  the  office  of  their  confidential  agents  at  Galveston,  or  what 
objection  they  might  have  to  their  being  made  payable  at  the  office 
of  C.  Ennis  &  Co.,  at  Houston.  The  contract  of  sale  therefore  was  not 
consummated,  and  there  consequently  was  no  transfer  of  the  prop- 
erty. It  is  wholly  immaterial  whether  the  consignors  declined  to 
accept  because  of  the  variation  in  the  terms  they  had  proposed,  or 
because  they  had  been  informed  of  the  imposition  which  had  evi- 
dently been  i)ractised  upon  them,  as  to  the  means  and  ability  of  the 
purchaser.  Their  assent  was  necessary  to  the  completion  of  the  con- 
tract ;  without  it  there  was  no  contract,  from  whatever  cause  it  may 
have  been  withheld.  They  were  at  liberty  to  recede  at  any  time 
before  the  acceptance  of  their  proposition;  and  having  done  so,  they 
had  the  right  to  resume  the  possession  of  their  property. 

4.     What  is  Property. 

Griffith  V.  Charlotte  R.  R.  Co.  2^  S.  C.  25. 

(Jriffith,  as  administrator  of  Hook,  sues  the  railroad  company 
for  damages  to  the  corpse  of  Hook,  who  had  been  murdered,  and 


SALES  277 

whose  corpse  had  been  laid  on  the  railroad  track  so  that  a  train 
ran  over  it. 

Held,  that  an  administrator  has  no  title  to  the  dead  body  of 
his  decedent  and  therefore  can  not  maintain  an  action  for  mutila- 
tion. 

Simpson,  C.J. 

The  term  property  may  be  defined  to  be  the  interest  which  can  be 
acquired  in  external  objects  or  things.  The  things  themselves  are 
not,  in  a  true  sense,  property,  but  they  constitute  its  foundation  and 
material,  and  the  idea  of  property  springs  out  of  the  connection,  or 
control,  or  interest  which,  according  to  law,  may  be  acquired  in  them, 
or  over  them.  This  interest  may  be  absolute,  or  it  may  be  limited 
and  qualified.  It  is  absolute  when  a  thing  is  objectively  and  law- 
fully appropriated  by  one  to  his  own  use  in  exclusion  of  all  others. 
It  is  limited  or  qualified  when  the  control  acquired  falls  short  of  the 
absolute,  which  may  be  the  case  sometimes  for  several  reasons  not 
necessary  to  be  adverted  to  here.  Now,  to  entitle  one  to  bring  action 
for  an  injury  to  any  specific  object  or  thing,  he  must  have  a  prop- 
erty therein  of  the  one  kind  or  the  other  mentioned.  If  he  has  no 
such  property,  he  can  have  no  cause  of  action,  however  flagrant  or 
reprehensible  the  act  complained  of  may  be. 

Can  property,  either  absolute  or  qualified,  be  acquired  in  a 
corpse,  and  especially  as  involved  in  the  case  under  investigation, 
can  such  property  be  acquired  by  the  administrator  of  the  deceased? 
As  to  absolute  property,  "Though  the  heir  has  a  property  in  the 
monuments  and  escutcheons  of  his  ancestors,  yet  he  has  none  in  their 
bodies  or  ashes."  "A  dead  body  by  law  belongs  to  no  one,  and  is 
therefore  under  the  protection  of  the  public."  "There  can  be  no 
property  in  a  person  deceased,  consequently  larceny  cannot  be  com- 
mitted of  his  body,  but  it  can  be  of  the  clothes  found  upon  the  body, 
or  of  the  shroud." 

5.     What  are  Goods. 

Vazvter  v.  Griffin.   40  Ind.  §pj. 

Griffin  and  Williams  made  a  note  to  Moore  which  was  after- 
wards assigned  to  Vawter,  who  sues  on  it.  Moore  at  the  time 
owed  Williams  a  debt  which  Williams  orally  assigned  to  Griffin 
in  connection  with  the  transaction.  In  a  suit  on  the  note,  Griffin 
insists  that  he  has  a  right  to  set  off  the  amount  which  it  finally 
turned  out  that  Moore  owed  Williams.  The  question  is  raised 
whether  the  agreement  between  Williams  and  Griffin  was  not  in 
any  event  void  as  a  sale  of  "goods"  of  the  value  of  $50  or  more^ 
and  hence  within  the  statute  of  frauds. 

Held,  that  the  term  "goods"  does  not  include  choses  in  action ; 
and  that  the  oral  agreement  was  valid. 


278  COMMERCIAL    LAW    CASES 

Buskirk,  J. 

The  solution  of  the  question  will  depend  upon  the  meaning  to  be 
attached  to  the  word  "goods."  Is  the  word  comprehensive  enough 
to  embrace  promissory  notes  and  things  in  action?  A  legislative  con- 
struction has  been  placed  upon  the  phrase  "personal  property"  and 
the  word  "property."  The  word  "property"  includes  personal  and 
real  property.  The  phrase  "personal  property"  includes  goods,  chat- 
tels, evidences  of  debt,  and  things  in  action. 

The  phrase  "personal  property"  is  a  much  more  comprehensive 
term  to  designate  objects  of  ownership  than  the  word  "goods." 
The  word  "goods"  is  defined  by  Webster  as  follows:  "Goods,  n.  pi.  i. 
Movables ;  household  furniture.  2.  Personal  or  movable  estate,  as 
horses,  cattle,  utensils,  etc.  3.  Wares;  merchandise;  commodities 
bought  and  sold  by  merchants  and  traders."  The  word  is  defined 
by  Worcester  as  follows:  "Goods,  n.  pi.  i.  Movables;  personal  or 
movable  estate;  furniture;  chattels;  effects.  'All  your  goods,  lands, 
tenements.'  Shak.  2.  Wares;  freight;  merchandise;  commodities. 
The  term  'goods'  comprehends  a  person's  furniture  and  other  mov- 
ables, or  movable  property;  chattels,  cattle,  implements  of  hus- 
bandry, etc.;  goods  and  chattels,  personal  estate  and  effects.  Ef- 
fects is  a  term  nearly  synonymous  with  goods,  and  includes  lands, 
tenements,  furniture,  etc.  The  goods  or  merchandise  of  a  trader ; 
a  manufacturer's  wares;  the  commodities  of  a  country." 

The  word  "chose,"  and  the  phrases  "choses  in  possession"  and 
"choses  in  action,"  are  defined  as  follows:  "Chose  (fr.  thing)  :  per- 
sonal property.  Choses  in  possession :  personal  things  of  which  one 
has  possession.  Choses  in  action  :  personal  things  of  which  the  owner 
has  not  the  possession,  but  merely  a  right  of  action  for  their  posses- 
sion." 

The  phrase  "chose  in  action"  is  defined  to  be  a  thing  which  a 
man  has  not  the  actual  possession  of,  but  which  he  has  a  right  to 
demand  by  action,  as  a  debt  of  demand  due  from  another. 

All  the  definitions  of  the  word  "goods"  refer  to  things  that 
are  visible  and  in  possession,  while  the  definition  of  "chose  in  action" 
refers  to  .something  invisible,  intangible,  as  a  debt  or  demand  or 
right  of  action. 

We  are  very  clearly  of  the  opinion  that  contracts  for  the  sale 
of  evidences  of  debt  and  things  in  action  are  not  within  our  statute 
of  frauds. 

6.    What  is  Price. 

The  Madison  Ave.  Baptist  Church  v.  The  Baptist  Church  in 
Oliver  St.    46  N.  V.  13 J. 

The  Madison  Avenue  Baptist  Church  seeks  to  recover  pos- 
session of  property  claimed  to  liave  hceii  sold  without  authority 
l(;  the  other  Church.     The  question  at  issue  turns  upon  the  con- 


SALES  279 

struction  of  a  statute  authorizing  the  "sale"  of  property  of  relig- 
ious corporations. 

Held,  that  a  sale  requires  a  i)rice. 

Grovcr,  J . 

The  inquiry  is,  whether  the  contemplated  conveyance  from  the 
plaintiff  to  the  defendant,  upon  the  terms  and  consideration  set 
out  in  the  petition,  would  constitute  a  sale  within  the  meaning  of 
the  eleventh  section  of  the  act.  A  sale  is  a  transmutation  of  prop- 
erty from  one  man  to  another,  in  consideration  of  some  price  or 
recompense  in  value;  as  a  contract  for  the  transfer  of  property  from 
one  person  to  another  for  a  valuable  consideration;  and,  among 
the  requisites  to  its  validity,  is  mentioned  the  price  paid  or  to  be 
paid.  [It  is]  an  agreement  by  which  one  man  gives  a  thing  for 
a  price  in  current  money.  This  differs  from  a  barter  or  exchange  in 
this,  that  in  the  latter,  the  price,  instead  of  being  paid  in  money,  is 
paid  in  goods  or  merchandise  susceptible  of  a  valuation.  The  term 
would  embrace  every  transfer  for  a  valuable  consideration,  whether 
paid  in  cash  or  other  property.  In  case  payable  in  the  latter,  the 
property  to  be  received  should  be  specified  in  the  petition,  so  as  to 
enable  the  court  to  determine  whether  the  proposed  contract  is 
judicious  on  the  part  of  the  corporation.  Tested  by  this  construction, 
the  arrangement  set  out  in  the  petition  was  in  no  sense  a  sale  of  the 
property  by  the  plaintiff  to  the  defendant.  There  was  no  price 
whatever  to  be  paid  therefor.  The  plaintiff,  as  a  corporation,  was 
to  derive  no  possible  benefit  as  a  consideration  for  the  conveyance. 
True,  the  members  of  the  plaintiff's  church  were  to  be  received 
into,  and  become  members  of,  the  defendant's  church,  and  the  plain- 
tiff's corporators  were  to  become  corporators  of  the  defendant.  This 
may  be  regarded  as  a  benefit  conferred  upon  those  classes  as  in- 
dividuals, but  can  in  no  sense  be  so  to  the  plaintiff,  regarded  as  a 
corporation.  Indeed,  the  arrangement  could  only  be  made  effectual 
by  the  dissolution  of  the  plaintiff;  and  this  result  it  was  the  manifest 
purpose  of  the  arrangement  to  effect. 


B.     Sales  Distinguished  from  Similar  Transactions. 

I.    License. 

Arnold  v.  North  American  Chemical  Co.  27,2  Mass.  ip6. 

The  Chemical  Company  agreed  with  Arnold,  a  former  stock- 
holder in  the  corporation,  that  if  it  should  sell  its  shoe  filler  busi- 
ness in  Canada  or  any  foreign  country,  Arnold  should  receive 
a  certain  share  of  the  proceeds  of  the  sale.  The  company  after- 
wards issued  licenses  for  the  use  of  this  filler  to  persons  in  Great 


28o  COMMERCIAL    LAW    CASES 

Britain  and  Germany  for  terms  of  five  years.  Arnold  seeks  to 
recover  a  share  of  the  Hcense  fees  on  the  theory  that  such  transfers 
are  included  in  the  terms  of  his  contract. 

Held,  that  a  license  is  to  be  distinguished  from  a  sale. 

Rugg,  C.  J. 

The  word  "sale"  has  a  well  defined  meaning.  It  is  the  transfer 
of  property  from  one  person  to  another  for  a  consideration  of  value. 
The  world  implies  ordinarily  the  passing  from  seller  to  buyer  of  the 
general  and  absolute  title  to  property  as  distinguished  from  a  special 
interest,  a  bailment,  a  license,  a  lease,  a  pawn  or  other  limited  right 
falling  short  of  complete  ownership.  The  distinction  between  a  sale 
as  a  complete  change  of  title  and  other  transactions  amounting  merely 
to  the  acquisition  of  some  particular  property  right  is  well  estab- 
lished. 

Plainly  the  contract  between  the  defendant  and  the  British  cor- 
poration in  form  was  not  a  sale.  The  decisive  descriptive  words 
used  are  "exclusive  license."  That  means,  considered  abstractly,  a 
privilege  or  authority  granted  to  another  to  do  that  which  he  would 
not  otherwise  be  justified  in  doing,  by  one  who  possesses  and  retains 
a  superior  right  or  power.  As  applied  to  a  patent  it  signifies  the 
assignment  by  the  patentee  to  another  of  rights  less  in  degree  than 
an  interest  in  the  patent  itself.  The  law,  however,  will  not  be 
bound  by  the  form  of  the  transaction,  but  giving  due  effect  to  all 
the  words  used  will  look  to  the  substance  of  the  matter  in  order  to 
determine  whether  there  has  been  a  sale.  Testing  the  contract  in 
this  way,  it  confers  a  license  and  is  not  the  equivalent  of  a  sale 
or  absolute  transfer.  It  was  limited  in  point  of  time.  The  entire 
title  to  the  patents  in  Great  Britain  was  not  transferred  to  the  British 
Corporation  and  hence  there  was  no  sale.  The  effect  of  the  written 
instruments  was  to  grant  a  license  and  not  to  make  a  complete 
transfer. 

2.     Bailment  and  Conditional  Sale. 

Union  Stock-Yards  and  Transit  Co.  v.  Western  Land  and 
Cattle  Co.,  Ltd.  ^p  Fed.  4Q. 

The  Cattle  Company  made  certain  contracts  with  Daniel  Hall 
whereby  Hall  agreed  to  receive  and  transport  cattle  belonging  to 
the  Company,  feed  them,  be  liable  for  losses  and  take  as  compen- 
sation all  that  should  be  received  over  a  certain  price  per  head, 
upon  their  sale  by  the  Company.  The  cattle  were  mortgaged  with- 
out authority  by  Hall  to  Hall,  Greer  &  Co.,  who  seized  them  and 
deposited  them  with  the  Union  Slock- Yards  Company.  The  Cattle 
Company  seeks  the  return  of  these  cattle,  claiming  that  the  trans- 
action with  Hall  was  not  a  sale  but  a  bailment. 


SALES  281 

Held,  that  the  transaction  was  a  bailment,  not  a  conditional 
sale. 

Jenkins,  Cir.  J. 

If  the  contract  constitutes  a  bailment  of  personal  property, 
and  Hall  was  an  agister,  the  judgment  [of  the  court  below  for 
the  Cattle  Company]  is  clearly  right.  If,  on  the  other  hand,  the 
contract  should  be  construed  as  a  conditional  sale  of  personal  property, 
reserving  the  title  in  the  vendor  until  payment  of  the  purchase  price, 
then,  by  force  of  the  statutes  of  Missouri,  the  contract  is  void  as  to 
Hall,  Greer  &  Co.,  who,  for  the  purposes  of  this  case,  as  presented 
to  us,  must  be  deemed  purchasers  for  value,  without  notice  of  the 
rights  of  the  Cattle  Company.  The  purpose  of  that  statute  is  to 
avoid,  as  against  subsequent  purchasers  in  good  faith,  and  creditors, 
all  secret  liens  upon  personal  property. 

It  is  of  the  essence  of  a  contract  of  sale  that  there  should  be 
a  buyer  and  a  seller;  a  price  to  be  given  and  taken;  an  agreement 
to  pay,  and  an  agreement  to  receive.  "Sale"  is  a  word  of  precise 
legal  import.  "It  means,  at  all  times,  a  contract  between  parties  to 
give  and  to  pass  rights  of  property  for  money,  which  the  buyer 
pays,  or  promises  to  pay,  to  the  seller,  for  the  thing  bought  and 
sold."  A  conditional  sale  implies  the  delivery  to  the  purchaser  of 
the  subject  matter,  the  title  passing  only  upon  the  performance  of 
a  condition  precedent,  or  becoming  reinvested  in  the  seller  upon 
failure  to  perform  a  condition  subsequent.  It  is  not  infrequently  a 
matter  of  difficulty  to  accurately  distinguish  between  a  conditional 
sale  and  a  bailment  of  property.  The  border  line  is  somewhat  ob- 
scure, at  times.  The  difficulty  must  be  solved  by  the  ascertainment 
of  the  real  intent  of  the  contracting  parties,  as  found  in  their  agree- 
ment. There  are,  however,  certain  discriminating  earmarks,  so 
to  speak,  by  which  the  two  may  be  distinguished.  It  is  an  indelible 
incident  to  a  bailment  that  the  bailor  may  require  restoration  of 
the  thing  bailed.  If  the  identical  thing,  either  in  its  original  or  in 
an  altered  form,  is  to  be  returned,  it  is  a  bailment.  In  a  contract  of 
sale  there  is  this  distinguishing  test,  common  to  an  absolute  and  to 
a  conditional  sale :  that  there  must  be  an  agreement,  expressed  or 
implied,  to  pay  the  purchase  price.  In  a  bailment,  if  a  bailment  for 
hire,  there  must  be  a  payment  for  the  use  of  the  thing  let  or  bailed. 
If  service  is  to  be  rendered  the  subject  matter  of  the  bailment,  there 
must  be  compensation  for  the  service,  unless  the  bailment  be  a  mandate. 
In  a  contract  of  conditional  sale  the  agreement  to  pay  the  purchase 
price  may  be  masked  so  as  to  give  it  the  appearance  of  an  agreement 
to  pay  for  use.  In  such  case  the  court  must  ascertain  the  real  in- 
tention of  the  contracting  parties  from  the  whole  agreement,  read 
in  the  light  of  the  surrounding  circumstances. 

We  must  therefore  subject  the  provisions  of  the  contracts  in 
question  to  the  tests  declared,  to  ascertain  the  real  design  of  the 
contracting  parties;  to   determine   whether,   under  them,   the   cattle 


282  COMMERCIAL   LAW    CASES 

were  bailed,  or  conditionally  sold.  Careful  scrutiny  of  the  agreements, 
in  the  light  of  legal  principles,  compels  us  to  the  conviction  that 
they  must  be  held  to  be  contracts  of  bailment. 

3.     Return  of  Identical  Goods  in  Bailment. 

Laflin  and  Rand  Powder  Company  v.  Burkhardt.  97  U.  S. 
no. 

The  Powder  Company  made  a  contract  with  Dittmar  whereby 
Dittmar  under  a  patented  process  owned  by  him,  manufactured 
a  certain  explosive  with  materials  advanced  by  the  Powder  Com- 
pany and  upon  credit  furnished  by  it.  The  money  and  materials 
were  to  be  charged  to  Dittmar  against  the  mantifactured  goods, 
and  the  parties  were  to  divide  the  profits.  Burkhardt,  who  held 
a  judgment  against  Dittmar,  seized  on  execution  goods  which  had 
been  manufactured  in  part  from  materials  furnished  by  the  Pow- 
der Company,  which  now  seeks  to  recover  the  goods  from 
Burkhardt. 

Held,  that  in  order  that  a  bailment  shall  exist,  the  identical 
goods  must  be  returned. 

Hunt,  J . 

The  plaintiff  in  error  contends  that  the  present  is  the  case  of 
a  bailment,  and  not  of  a  sale  or  a  loan  of  the  goods  and  money  to 
Dittmar.  It  is  contended  that  the  question  of  bailment  or  not  is 
determined  by  the  fact  whether  the  identical  article  delivered  to  the 
manufacturer  is  to  be  returned  to  the  party  making  the  advance. 
Thus,  where  logs  are  delivered  to  be  sawed  into  boards,  or  leather 
to  be  made  into  shoes,  rags  into  paper,  olives  into  oil,  grapes  into 
wine,  wheat  into  flour,  if  the  product  of  the  identical  articles  de- 
livered is  to  be  returned  to  the  original  owner  in  a  new  form,  it  is 
said  to  be  a  bailment,  and  the  title  never  vests  in  the  manufacturer. 
If,  on  the  other  hand,  the  manufacturer  is  not  bound  to  return  the 
same  wheat  or  flour  or  paper,  but  may  deliver  any  other  of  equal 
value,  it  is  said  to  be  a  sale  or  a  loan,  and  the  title  to  the  thing  de- 
livered vests  in  the  manufacturer. 

The  materials  to  be  sent  were  to  be  delivered  to  Dittmar,  to 
be  in  his  actual  possession  and  under  his  absolute  control.  We 
see  nothing  requiring  that  the  identical  acids  sent  should  be  used 
in  the  manufacture  of  the  explosives,  and  nothing  to  prevent  an 
exchange  by  Dittmar  for  other  materials,  if  he  found  any  of  the  arti- 
cles to  be  unsuitable,  or  if  he  found  that  he  had  too  much  of  one 
kind  and  too  little  of  another,  acting  honestly  in  the  interests  of 
both  parties.  The  case  is  quite  different  from  the  single  mechanical 
transaction  of  turning  a  specific  set  of  logs  into  boards  or  a  specific 
lot  of  wheat  into  flour,  where  there  is  no  room  for  judgment  or  dis- 
cretion. 


SALES  283 

The  Powder  Company  relied  upon  the  general  result.  The  de- 
livery of  the  material  to  Dittmar  did  not  create  a  bailment. 

4,     Bailment  of  Goods  Mixed  with  Other  Goods. 

Rice  V.  Nixon,  p/  Ind.  gy. 

Nixon,  a  warehouseman,  received  wheat  from  the  plaintiff, 
which,  as  his  custom  was,  he  deposited  in  his  warehouse  with  other 
wheat.  All  the  wheat  in  the  warehouse  was  destroyed  by  fire. 
The  plaintiff  contends  that  the  contract  was  one  of  sale  and  that 
she  is  entitled  to  the  value  of  the  grain  so  destroyed. 

Held,  that  grain  deposited  in  a  warehouse  represents  a  bail- 
ment, not  a  sale. 

Elliott,  C.  J. 

There  are  cases  in  which  a  bailee  is  responsible  for  the  loss  of 
goods  where  he  commingles  them  with  his  own,  but  this  principle 
does  not  apply  where  a  warehouseman  receives  grain  to  be  stored 
for  the  owner.  Articles  of  such  a  character  can  be  separated  by 
measurement,  and  no  injury  result  to  the  owner  from  the  act  of  the 
warehouseman  in  mingling  them  with  like  articles  of  his  own.  "If 
one  man  mixes  his  corn  or  flour  with  that  of  another,  and  they 
were  of  equal  value,  the  latter  must  have  the  given  quantity;  but, 
if  articles  of  different  value  are  mixed,  producing  a  third  value, 
the  aggregate  of  both,  and  through  the  fault  of  the  person  mixing 
them  the  other  party  cannot  tell  what  was  the  original  value  of 
his  property,  he  must  have  the  whole."  This  is  the  view  taken  by 
the  text-writers  and  courts  generally  in  cases  where  the  deposit  is 
made  with  a  warehouseman.  There  is,  however,  some  conflict  of 
opinion,  but,  as  said  in  a  late  work,  the  great  weight  of  authority  is 
that  the  contract  is  one  of  bailment  and  not  of  sale,  the  warehouseman 
and  the  depositor  becoming  owners  as  tenants  in  common. 

The  rule  which  we  accept  as  the  true  one  is  required  by  the 
commercial  interests  of  the  country,  and  is  in  harmony  with  the 
cardinal  principle  that  the  intention  of  contracting  parties  is  always 
to  be  given  effect.  It  is  reasonable  to  presume  that  the  warehouse- 
man and  his  depositor  did  not  intend  that  the  course  of  business 
should  be  interrupted,  and  that  they  did  not  intend  that  the  almost 
impossible  thing  of  keeping  each  lot,  small  or  great,  apart  from  the 
common  mass  should  be  done  by  the  warehouseman.  If  the  ware- 
houseman is  not  bound  to  place  grain  in  a  separate  place  for  each 
depositor,  then  the  fact  that  he  puts  it  in  a  common  receptacle  with 
grain  of  his  own  and  that  of  other  depositors  does  not  make  him  a 
purchaser,  and  if  he  is  not  a  purchaser,  then  he  is  a  bailee.  In  all 
matters  of  contract  the  intention  of  the  parties  gives  character  and 
effect  to  the  transaction,  and  in  such  a  case  as  this  the  circumstances 
declare  that  the  intention  was  to  make  a  contract  of  bailment  and 


284  COMMERCIAL    LAW    CASES 

not  a  contract  of  sale.  The  duties,  rights  and  liabiHties  of  ware- 
housemen are  prescribed  by  the  law  as  declared  by  the  courts  and  the 
legislature,  and  as  a  matter  of  law  it  is  known  to  us  that  a  warehouse- 
man, by  placing  grain  received  from  a  depositor  in  a  common  recepta- 
cle, and  treating  it  as  the  usages  of  trade  warrant,  does  not  become  the 
buyer  of  the  grain,  unless,  indeed,  there  is  some  stipulation  in  the 
contract  imposing  that  character  upon  him. 

It  has  been  long  settled  that  where  property  in  the  custody 
of  a  bailee  is  destroyed  by  an  accidental  fire,  and  there  has  been 
no  fault  or  negligence  on  his  part,  he  is  not  liable. 

5.    Bailment  with  Option  to  Buy. 

Frye  v.  Burdick.   6y  Me.  408. 

Frye,  who  had  a  government  contract  to  carry  the  mail,  en- 
tered into  a  written  agreement  with  Burdick  whereby  Burdick 
agreed  to  carry  the  mail  and  took  over  horses  belonging  to  Frye, 
undertaking  to  return  them  in  good  order  at  the  end  of  two  years 
unless  paid  for.  The  horses  were  abused  and  the  wagons  in- 
jured.    Frye  sues  for  damages  for  injury  to  them. 

Held,  that  the  transaction  in  reference  to  the  horses  consti- 
tuted a  bailment  and  that  the  bailor  could  sue  for  damages  sus- 
tained by  breach  of  its  terms. 

Appleton,  C.  J. 

The  law  seems  well  settled  that  where  one  receives  goods  and 
chattels  of  another  on  a  contract,  by  which  he  has  a  right  to  return 
them  or  pay  a  stipulated  price  for  them,  the  property  passes  and  he  is 
regarded  as  the  purchaser. 

And  in  all  the  cases  to  which  we  have  been  referred,  the  contract 
was  in  the  alternative,  to  return  or  pay  the  stipulated  price. 

In  the  present  case  the  defendant  received  horses  and  other 
property  of  the  plaintiff,  for  which  he  and  the  other  defendant 
gave  the  following  receipt:  "Dexter,  July  i,  1873.  This  day  re- 
ceived of  W.  A,  Frye  two  black  horses,  called  Hiram  and  Indian, 
two  bay  horses,  called  Fairbrother  and  Jenkins,  two  two-seated 
wagons,  two  single  harnesses,  the  above  property  valued  at  eight 
hundred  dollars,  which  I  agree  to  keep  in  good  order  and  condition 
and  return  the  same  to  W.  A.  Frye,  at  the  end  of  two  years,  unless 
paid  for.     (Signed.)    Joseph  U.  Burdick,  V.  Mason  Burdick,  surety." 

Here  no  bargain  for  the  sale  of  property  is  shown.  The  prop- 
erty is  "received"  not  "bought."  No  price  for  each  or  all  of  the 
articles  is  agreed  upon.  They  are  only  valued.  There  is  no  prom- 
ise to  pay. 

The  contract  between  the  parties  embodied  in  the  writings  was 
one  of  bailment,  not  of  sale.     It  is  not  in  the  alternative.     It  is  to 


SALES  285 

keep  the  property  in  good  order  and  condition  and  return  the  same 
at  a  stipulated  time  "unless  paid  for."  The  principal  in  the  contract 
is  not  absolved  from  his  promise  to  keep  and  return  except  upon 
payment.  He  is  bound  to  return  the  articles  received  unless  paid  for. 
The  principal  has  no  title  unless  on  payment.  V.  Mason  Burdick  is 
surety — for  what?  That  the  property  received  shall  be  kept  in  good 
order  and  condition  and  returned  unless  paid  for.  The  promise 
then  to  return  the  goods  is  obligatory  unless  something  else  is  done, 
that  is,  unless  it  is  paid  for.  The  surety  is  not  liable  for  the  price, 
for  none  has  been  made.  He  is  surety  only  that  the  contract  should 
be  performed,  and  he  is  not  to  be  relieved  except  upon  its  perform- 
ance.   The  contract  contains  no  words  of  sale. 

There  can  be  no  reasonable  doubt  as  to  the  meaning  of  the 
parties.  The  one  did  not  intend  to  part  with  his  title.  The  other 
did  not  suppose  he  was  acquiring  one.  If  the  title  to  the  property 
has  changed,  the  change  has  taken  place  without  the  knowledge 
or  expectation  of  either  party  and  against  the  intention  of  both.  But 
no  such  change  has  taken  place.  The  contract  to  safely  keep  and 
return  was  explicit.  The  defendants  cannot  be  relieved  from  their 
liability,  unless  upon  payment.  But  payment  has  not  been  made. 
The  contract,  then,  is  in  full  force  to  keep  in  good  order  and  condi- 
tion and  return,  and  the  defendants  are  liable  in  damages  for  its 
violation. 

6.     Conditional  Sale. 

Harkness  v.  Russell.  118  U.  S.  66^. 

Russell  &  Company  sold  Phelan  and  Ferguson  engines,  boilers, 
and  saw  mills  under  a  contract  whereby  the  title  to  the  property 
should  not  pass  until  a  note  given  for  it  was  paid.  Subsequently, 
Phelan  and  Ferguson  sold  the  property  to  the  defendant  Harkness. 
Russell  &  Company  now  sue  to  recover  its  value  from  Harkness. 

Held,  that  the  contract  was  a  conditional  sale  and  not  a  mort- 
gage. 

Bradley,  J. 

The  first  question  to  be  considered  is,  whether  the  transaction 
in  question  was  a  conditional  sale  or  a  mortgage ;  that  is,  whether 
it  was  a  mere  agreement  to  sell  upon  a  condition  to  be  performed,  or 
an  absolute  sale,  with  a  reservation  of  a  lien  or  mortgage  to  secure 
the  purchase-money.  H  it  was  the  latter,  it  is  conceded  that  the 
lien  or  mortgage  was  void  as  against  third  persons  because  not  veri- 
fied by  affidavit  and  not  recorded  as  required  by  the  law  of  Idaho. 
But,  so  far  as  words  and  the  express  intent  of  the  parties  can  go,  it 
is  perfectly  evident  that  it  was  not  an  absolute  sale,  but  only  an 
agreement  to  sell  upon  condition  that  the  purchasers  should  pay  their 
notes  at  maturity.    Two  rules  are  laid  down  as  established :     ( i )  That 


286  COMMERCIAL    LAW    CASES 

where  by  the  agreement  the  vendor  is  to  do  anything  to  the  goods  be- 
fore dehvery,  it  is  a  condition  precedent  to  the  vesting  of  the  property. 
(2)  That  where  anything  remains  to  be  done  to  the  goods  for  ascer- 
taining the  price,  such  as  weighing,  testing,  &c.,  this  is  a  condition 
precedent  to  the  transfer  of  the  property.  And  it  is  subsequently 
added,  that  "the  parties  may  indicate  an  intention,  by  their  agreement, 
to  make  any  condition  precedent  to  the  vesting  of  the  property,  and. 
if  they  do  so,  their  intention  is  fulfilled."  To  the  two  formulated 
rules  [is  added]  a  third  rule,  which  is  supported  by  many  authorities. 
to  wit:  (3)  "Where  the  buyer  is  by  the  contract  bound  to  do  any- 
thing as  a  condition,  either  precedent  or  concurrent,  on  which  the 
passing  of  the  property  depends,  the  property  will  not  pass  until  the 
condition  be  fulfilled,  even  though  the  goods  may  have  been  actually 
delivered  into  the  possession  of  the  buyer." 

In  this  country  many  decisions  have  been  rendered  sustaining 
conditional  sales  accompanied  by  delivery  of  possession,  both  as 
between  the  parties  themselves  and  as  to  third  persons. 

In  Coggill  V.  Hartford  &  New  Haven  Railroad,  3  Gray,  545-547, 
the  rights  of  a  bona  fide  purchaser  from  one  in  possession  under  a 
conditional  sale  of  goods  were  specifically  discussed,  and  the  court 
held  that  a  sale  and  delivery  of  goods  on  condition  that  the  title  shall 
not  vest  in  the  vendee  until  payment  of  the  price,  passes  no  title 
until  the  condition  is  performed,  and  the  vendor,  if  guilty  of  no 
laches,  may  reclaim  the  property  even  from  one  who  has  purchased 
from  his  vendee  in  good  faith,  and  without  notice ;  [the]  opinion 
[commencing]  in  the  following  terms : 

"It  has  long  been  the  settled  rule  of  law  in  this  commonwealth 
that  a  sale  and  delivery  of  goods  on  condition  that  the  property 
is  not  to  vest  until  the  purchase-money  is  paid  or  secured,  does  not 
pass  the  title  to  the  vendee,  and  that  the  vendor,  in  case  the  condition 
is  not  fulfilled,  has  a  right  to  repossess  himself  of  the  goods,  both 
against  the  vendee  and  against  his  creditors  claiming  to  hold  them 
under  attachments."  He  then  addresses  himself  to  a  consideration 
of  the  rights  of  a  bona  fide  purchaser  from  the  vendee,  purchasing 
without  notice  of  the  condition  on  which  the  latter  holds  the  goods  in 
his  possession ;  and  he  concludes  that  they  are  no  greater  than  those 
of  a  creditor.  He  says :  "All  the  cases  turn  on  the  principle  that 
the  compliance  with  the  conditions  of  sale  and  delivery  is,  by  the 
terms  of  the  contract,  precedent  to  the  transfer  of  the  property  from 
the  vendor  to  the  vendee.  The  vendee  in  such  cases  acquires  no 
property  in  the  goods.  He  is  only  a  bailee  for  a  specific  purpose. 
The  delivery  which  in  ordinary  cases  passes  the  title  to  the  vendee 
must  take  effect  according  to  the  agreement  of  the  parties,  and  can 
operate  to  vest  the  property  only  when  the  contingency  contemplated 
by  the  contract  arises.  The  vendee,  therefore,  in  such  cases,  having 
no  title  to  the  property,  can  pass  none  to  others.  He  has  only  a 
bare  right  of  possession ;  and  those  who  claim  under  him,  either  as 
creditors  or  j)urchasers,  can  acquire  no  higher  or  better  title.     Such 


SALES  287 

is  the  necessary  result  of  carrying  into  effect  the  intention  of  the 
parties  to  a  conditional  sale  and  delivery.  Any  other  rule  would 
be  equivalent  to  the  denial  of  the  validity  of  such  contracts.  But 
they  certainly  violate  no  rule  of  law,  nor  are  they  contrary  to  sound 
policy." 

7.    Pledge. 

Trenholm  v.  Miles.  102  Miss.  6*55. 

Mrs.  Miles,  the  defendant,  leased  land  to  King,  retaining  a 
lien  on  the  crops  for  the  rent.  Afterwards,  King  conveyed  all 
his  crops  to  her  under  a  deed  of  trust,  authorizing  her  to  market 
and  sell  them,  which  she  did.  Trenholm,  as  trustee  in  bank- 
ruptcy of  the  estate  of  King,  attempts  to  recover  money  from  the 
defendant  on  the  theory  that  she  received  a  preference  which 
would  be  voidable  under  the  bankruptcy  act. 

Held,  that  the  transaction  constituted  a  sale  and  not  a  pledge. 

Reed,  J. 

There  is  nothing  unusual  about  the  transaction  between  C.  L. 
King  and  appellee.  It  is  an  ordinary  business  affair,  quite  common 
in  this  state  in  the  dealings  between  planters  and  tenants.  It  is 
contended  by  appellant  that  the  understanding  between  appellee  and 
C.  L.  King  that  she  should  sell  the  cotton  in  New  Orleans  and  apply 
the  proceeds  thereof  to  the  settlement  of  the  amount  due  for  rent 
and  supplies  amounted  to  a  pledge,  and  that  the  pledge  was  sub- 
stituted for  the  liens  held  by  appellee  as  landlord  and  under  her  deed 
of  trust,  and  that  such  pledge  was  not  recognized  under  the  laws 
of  Louisiana,  and  that,  therefore,  appellee  lost  all  liens  which  she 
had  on  the  cotton  when  it  crossed  the  state  line  from  Mississippi 
into  Louisiana. 

"A  pledge  is  a  transfer  of  personal  property  as  a  security  for 
a  debt  or  other  obligation" : — "A  deposit  of  goods,  redeemable  on 
certain  terms" : — "A  lien  created  by  the  owner  of  personal  property 
by  the  mere  delivery  of  it  to  another,  upon  an  express  or  implied 
understanding  that  it  shall  be  retained  as  security  for  an  existing 
or  future  debt."  An  element  necessary  to  constitute  a  contract  one 
of  pledge  [is]  that  the  legal  title  to  the  pledged  property  must 
remain  in  the  pledgor.  "A  pledge  may  be  defined  to  be  a  deposit 
of  personal  property  as  security  with  an  implied  power  of  sale  upon 
default." 

"A  sale  is  to  be  distinguished  from  a  pledge,  which  is  a  bail- 
ment to  secure  the  payment  of  a  debt  or  the  performance  of  some 
other  act;  the  pledgee  acquiring  only  a  special  property  in  the  thing 
pledged.  When  personal  property  is  delivered  (as  security,  the 
transaction  is  a  pledge.  But  if  goods  are  delivered  by  a  debtor  to  his 
creditor  in  payment  of  the  debt,  the  transaction  has  the  effect  of  a 


288  COMMERCIAL   LAW    CASES 

sale;  and  the  same  is  true  if  goods  are  delivered  by  the  debtor  to 
the  creditor  to  be  sold,  and  the  proceeds  applied  on  the  debt,  with 
a  return  of  the  surplus.  A  transaction  on  its  face  a  sale  will  not 
be  converted  into  a  pledge  by  a  mere  agreement  to  resell." 

It  will  be  noted  in  the  present  case  that  the  appellee  had 
all  the  liens  and  security  she  could  ask  for  on  the  cotton,  and  that 
this  was  recognized  by  C.  L.  King.  Under  the  definition  that  a 
pledge  is  a  transfer  of  the  personal  property  as  security,  is  there 
any  reason  to  decide  that  King  transferred  to  Mrs.  Miles  the  cotton 
as  security?  We  conclude  that  the  facts  agreed  upon,  which  include 
the  provisions  of  the  lease  contract  and  the  deed  of  trust,  show  that 
the  cotton  was  not  delivered  as  security.  Is  it  not  clear  that  the 
cotton  was  delivered  to  appellee,  the  holder  of  the  liens,  at  Mile- 
stone, in  Mississippi,  in  payment  and  satisfaction  of  the  amounts  due 
her  and  secured  by  the  liens  she  held? 

Another  requisite  in  a  pledge  is  the  right  to  redeem  the  prop- 
erty deposited.  Did  King  have  any  such  right  in  this  case?  Surely 
the  statement  of  facts  shows  that  he  did  not.  The  cotton  was  de- 
livered to  appellee,  who  had  the  right  to  receive  it. 

8.     Chattel  Mortgage. 

Zhnmerle  v.  Childers.   6"/  Oreg.  465. 

Childers,  a  sheriff,  seized  as  property  of  the  Grande  Ronde 
Orchard  Company,  hay  and  oats  which  had  previously  been  con- 
veyed to  Zimmerle  by  a  bill  of  sale  to  secure  a  debt  which  the 
corporation  owed  him.  Zimmerle  was  treasurer  of  the  corpora- 
tion at  the  time.  Zimmerle  sues  to  recover  the  value  of  the 
property  from  the  sheriff. 

Held,  that  a  pretended  sale  may  be  shown  to  be  in  reality  a 
chattel  mortgage,  which  must  be  recorded  in  order  to  be  good 
against  other  attaching  creditors. 

Ramsey,  J. 

If  this  bill  of  sale  was  intended  at  the  time  that  it  was  executed 
to  operate  as  security  for  the  payment  of  a  debt  owing  by  the  vendor 
to  the  vendee,  it  is,  in  effect,  a  chattel  mortgage.  "In  determining 
whether  a  transaction  is  a  sale  or  a  chattel  mortgage,  the  court  will 
take  into  consideration  the  intention  of  the  parties,  in  view  of  all 
the   circumstances." 

"A  bill  of  sale,  although  absolute  on  its  face,  if  taken  as  security 
for  a  debt,  is  in  effect  a  chattel  mortgage,  and,  as  to  the  immediate 
parties,  thereto,  will  in  equity  be  treated  as  such.  But,  on  the  other 
hand,  the  general  principle  is  that  where  the  transaction  clearly 
shows  that  the  entire  interest  in  the  property  is  conveyed  without 
reservation,  it  will  be  treated  as  an  absolute  sale." 

"There   is  perhaps   no  conclusive   single  test   by  which  it  may 


SALES  289 

be  determined  that  any  transaction  may  be  denominated  or  legally 
characterized  as  a  mortgage,  as  distinguished  from  a  conditional  sale. 
The  primary  inquiry  may  be  said  to  be  the  intention  of  the  parties, 
and  this  may  be  determined,  not  alone  by  the  instrument  which  forms 
the  basis  of  the  transaction,  but  by  the  attendant  and  surrounding 
circumstances,  and  the  conditions  under  which  it  was  delivered  and 
designed  to  become  effective." 

In  this  case  if  it  was  the  intention  of  the  parties  at  the  time 
the  instrument  was  executed  to  convey  to  the  vendee  the  entire 
interest  in  the  property  without  reservation,  said  instrument  was 
a  bill  of  sale;  but,  if  it  was  the  intention  of  the  vendor  to  convey 
the  property  to  the  plaintiff  to  secure  the  debt  which  the  company 
owed  him,  with  the  agreement  that  he  was  to  sell  the  property  and 
to  credit  the  amount  received  for  it  on  the  debt,  and  that  no  credit 
was  to  be  made  on  the  debt  until  the  plaintiff  received  something  for 
the  sale  of  the  property,  such  instrument  was  in  effect  a  chattel  mort- 
gage. It  is  largely  a  matter  of  intention,  to  be  determined  by  the 
facts  and  circumstances  surrounding  the  transaction.  But,  in  cases 
of  doubt,  courts  are  inclined  to  construe  the  transaction  as  a  mort- 
gage. 

In  this  state,  in  an  action  at  law,  a  bill  of  sale  absolute  on  its 
face  may  be  shown  to  be  a  chattel  mortgage. 

If  a  bill  of  sale  is  made  to  secure  a  debt,  it  is  a  chattel  mortgage, 
and,  if  executed,  witnessed,  acknowledged  and  certified  as  a  chattel 
mortgage  is  required  to  be,  it  is  entitled  to  be  recorded  as  a  chattel 
mortgage. 

9.    Barter. 

Hartwig  v.  Rushing,  pj  Ore.  6. 

A  statute  in  Orgeon  (as  in  many  other  states)  prohibits  the 
sale  of  goods  in  bulk  unless  creditors  are  notified.  George  Hart- 
wig  transferred  his  entire  stock  in  trade  to  Rushing  in  exchange 
for  land  without  giving  the  required  notices.  The  plaintiff,  Wil- 
liam H.  Hartwig,  a  judgment  creditor  of  George  Hartwig,  con- 
tends that  the  transaction  amounted  to  a  sale  within  the  terms 
of  the  statute,  of  which  he  now  seeks  to  take  advantage  in  order  to 
establish  his  right  to  the  proceeds  of  the  goods. 

Held,  that  the  transaction  was  a  "sale"  within  the  meaning  of 
the  bulk  sales  law. 

Harris,  J. 

It  is  contended  that  the  statute  only  applies  to  a  "sale"  as 
distinguished  from  a  "barter  or  exchange"  of  personal  property  and 
that  the  bulk  sales  law  applies  only  to  transfers  "for  cash  or  on 
credit;"  that  the  transfer  of  the  store  to  Rushing  was  not  a  sale 


290  COMMERCIAL    LAW    CASES 

"for  cash  or  on  credit;"  and  that  therefore  the  transaction  was  not 
in  violation  of  the  bulk  sales  law. 

In  legal  nomenclature  the  term  "sale"  is  used  in  a  restricted 
and  also  in  a  broad  sense.  The  controversy  presented  by  this  appeal 
does  not  require  an  attempt  to  determine  whether  the  word  "sale" 
when  technically  and  exactly  defined  is  confined  to  the  restricted 
sense  or  comprehends  the  broad  meaning.  When  employed  in  its 
restricted  sense  it  means  a  transfer  of  title  for  money.  There  are 
numerous  transactions  where  the  word  "sale"  must,  because  of  the 
very  nature  of  the  business,  be  given  its  restricted  meaning,  as, 
for  example,  powers  of  attorney  and  the  like.  When  used  in  its 
broad  sense  the  term  "sale"  includes  the  transfer  of  personal  prop- 
erty for  a  consideration  estimated  in  money.  There  are  many  au- 
thorities which  define  a  sale  of  personal  property  as  the  transfer  of 
a  chattel  from  the  seller  to  the  buyer  for  a  price,  or  a  consideration 
estimated  in  money;  and  consequently  under  that  definition  if  prop- 
erty is  taken  at  a  fixed  money  price,  the  transfer  is  a  sale  whether 
the  fixed  money  price  is  paid  in  cash  or  in  goods.  A  barter  or 
exchange  of  properties  occurs  where  one  article  is  exchanged  for 
another,  no  price  in  money  being  fixed  upon  either. 

The  word  "sale"  is  sometimes  used  in  what  may  be  termed  its 
popular  sense,  and  when  so  used  signifies  the  transfer  of  property 
from  one  person  to  another  for  a  consideration  of  value,  without 
reference  to  the  particular  mode  in  which  the  consideration  is  paid; 
in  the  interpretation  of  statutes  the  word  "sale"  is  often  given 
its  popular  signification  and  "held  to  include  barter  and  any  transfer 
of  personal  property  for  a  valuable  consideration." 

10.     Contract  for  Work,  Labor  and  Materials. 

Cooke  V.  Millard.  65  N.  Y.  352. 

The  defendants  ordered  from  Cooke's  firm  over  $900  w^orth  of 
lumber  which  had  to  be  dressed  and  cut  to  the  required  size. 
They  selected  the  lumber  which  they  decided  to  have  manufac- 
tured, and  gave  instructions  as  to  shipment.  When  the  lumber 
was  ready  for  delivery,  but  before  it  was  shipped,  it  was  destroyed 
by  an  accidental  fire.  The  plaintift's  bring  an  action  for  the  price 
of  the  lumber,  to  which  the  statute  of  frauds  is  pleaded. 

Held,  that  under  the  New  York  rule,  an  agreement  for  the  sale 
of  an  article  in  existence,  but  upon  which  the  vendor  is  to  do  some 
work  to  adapt  it  to  the  uses  of  the  vendee,  is  a  sale. 

Dwiglit,  C. 

The  question  is  thus  reduced  to  the  following  proposition: 
Is  a  contract  which  is,  in  form,  one  of  sale  of  lumber  then  in 
existence  for  a  fixed  price,  where  the  seller  agrees  to  put  it  into 
a  state  of  fitness  to  fill  the  order  of  the  purchaser,  his  work  being 


SALES  291 

included  in  the  price,  in  fact  a  contract  for  work  and  labor  and 
not  one  of  sale,  and,  accordingly,  not  within  the  statute  of  frauds  ? 

The  New  York  statute  is  made  applicable  to  the  "sale  of  any 
goods,  chattels,  or  things  in  action"  for  the  price  of  fifty  dollars  or 
more.  The  words  "goods  and  chattels"  are,  literally  taken,  probably 
more  comprehensive  than  the  expressions  in  the  English  statute, 
"goods,  wares  and  merchandise."  It  will  be  assumed,  however,  in 
this  discussion,  that  they  are  equivalent. 

There  are,  at  least,  three  distinct  views  as  to  the  meaning  of 
the  words  in  the  statute.  These  may  be  called,  for  the  sake  of 
convenience,  the  English,  the  Massachusetts  and  the  New  York  rules, 
as  representing  the  decisions  in  the  respective  courts. 

The  English  rule  lays  especial  stress  upon  the  point  whether 
the  articles  bargained  for  can  be  regarded  as  goods  capable  of  sale 
by  the  professed  seller  at  the  time  of  delivery,  without  any  reference 
to  the  inquiry  whether  they  were  in  existence  at  the  time  of  the  con- 
tract or  not.  If  a  manufacturer  is  to  produce  an  article  which  at 
the  time  of  the  delivery  could  be  the  subject  of  sale  by  him,  the 
case  is  within  the  statute  of  frauds.  The  rule  excludes  all  cases 
where  work  is  done  upon  the  goods  of  another,  or  even  materials 
supplied  or  added  to  the  goods  of  another.  Thus,  if  a  carriage- 
maker  should  repair  my  carriage,  both  furnishing  labor  and  supply- 
ing materials,  it  would  be  a  contract  for  work  and  labor  as  the 
whole  result  of  his  efforts  would  not  produce  a  chattel  which  could 
be  the  subject  of  sale  by  him.  If,  on  the  other  hand,  by  the  con- 
tract he  lays  out  work  or  materials,  or  both,  so  as  to  produce  a 
chattel  which  he  could  sell  to  me,  the  contract  is  within  the  statute. 
This  conclusion  has  been  reached  only  after  great  discussion  and 
much  fluctuation  of  opinion,  but  must  now  be  regarded  as  settled. 
The  leading  case  upon  this  point  is  Lee  v.  Griffin,  i  Best  &  Smith 
272.  The  court  held  this  to  be  the  sale  of  a  chattel  within  the  statute 
of  frauds.  "If  the  contract  be  such  that  it  will  result  in  the  sale  of 
a  chattel,  then  it  constitutes  a  sale,  but  if  the  work  and  labor  be 
bestowed  in  such  a  manner  as  that  the  result  would  not  be  anything 
which  could  properly  be  said  to  be  the  subject  of  sale,  the  action 
is  for  work  and  labor." 

The  Massachusetts  rule,  as  applicable  to  goods  manufactured 
or  modified  after  the  bargain  for  them  is  made,  mainly  regards 
the  point  whether  the  products  can,  at  the  time  stipulated  for 
delivery,  be  regarded  as  "goods,  wares  and  merchandise,"  in  the 
sense  of  being  generally  marketable  commodities,  made  by  the  manu- 
facturer. In  that  respect,  it  agrees  with  the  English  rule.  The 
test  is  not  the  nonexistence  of  the  commodity  at  the  time  of  the 
bargain.  It  is,  rather,  whether  the  manufacturer  produces  the  arti- 
cle in  the  general  course  of  his  business  or  as  the  result  of  a  special 
order.  In  [a]  very  recent  case,  the  result  of  their  decisions  is  stated 
in  the  following  terms :  "A  contract  for  the  sale  of  articles  then 
existing,  or  such  as  the  vendor  in  the  ordinary  course  of  his  business 


292  COMMERCIAL   LAW    CASES 

manufactures  or  procures  for  the  general  market,  whether  on  hand 
at  the  time  or  not,  is  a  contract  for  the  sale  of  goods  to  which  the 
statute  applies.  But,  on  the  other  hand,  if  the  goods  are  to  be 
manufactured  especially  for  the  purchaser,  and  upon  his  special 
order,  and  not  for  the  general  market,  the  case  is  not  within  the 
statute."  Under  this  rule,  it  was  held  in  Gardner  v.  Joy,  9  Met.  177, 
that  a  contract  to  buy  a  certain  number  of  boxes  of  candles  at  a 
fixed  price  per  pound,  which  the  vendor  said  he  would  manufacture 
and  deliver  in  about  three  months,  was  held  to  be  a  contract  of  sale. 
On  the  other  hand,  in  Goddard  v.  Binney,  115  Mass.  450,  the  con- 
tract with  a  carriage  manufacturer  was  that  he  should  make  a  buggy 
for  the  person  ordering  it,  that  the  color  of  the  lining  should  be 
drab,  and  the  outside  seat  of  cane,  and  have  on  it  the  monogram 
and  initials  of  the  party  for  whom  it  was  made.  This  was  held 
not  to  be  contract  for  sale  within  the  statute. 

The  New  York  rule  is  still  different.  It  is  held  here  by  a  long 
course  of  decisions  that  an  agreement  for  the  sale  of  any  commodity 
not  in  existence  at  the  time,  but  which  the  vendor  is  to  manufacture 
or  put  in  a  condition  to  be  delivered,  such  as  flour  from  wheat 
not  yet  ground,  or  nails  to  be  made  from  iron  belonging  to  the 
manufacturer,  is  not  a  contract  of  sale.  The  New  York  rule  lays 
stress  on  the  word  sale.  There  must  be  a  sale  at  the  time  the  con- 
tract is  made.  The  latest  and  most  authoritative  expression  of  the 
rule  is  found  in  a  recent  case  in  this  court.  The  contrast  between 
Parson  v.  Loucks,  48  N.  Y.  17,  in  this  state,  on  the  one  hand,  and 
Lee  V.  Griffin  (supra),  in  England  on  the  other  is,  that  in  the  for- 
mer case,  the  word  sale  refers  to  the  time  of  entering  into  the  con- 
tract, while  in  the  latter,  reference  is  had  to  the  time  of  delivery, 
as  contemplated  by  the  parties.  If  at  that  time  it  is  a  chattel,  it  is 
enough,  according  to  the  English  rule. 

Were  this  subject  now  open  to  full  discussion  upon  principle, 
no  more  convenient  and  easily  understood  rule  could  be  adopted  than 
that  enunciated  in  Lee  v.  Griffin.  It  is  at  once  so  philosophical, 
and  so  readily  comprehensible,  that  it  is  a  matter  of  surprise  that 
it  should  have  been  first  announced  at  so  late  a  stage  in  the  discus- 
sion of  the  statute.  It  is  too  late  to  adopt  it  in  full  in  this  state. 
So  far  as  authoritative  decisions  have  gone,  they  must  be  respected, 
even  at  the  expense  of  sound  principle.  The  court,  however,  in 
view  of  the  present  state  of  the  law,  should  plant  itself,  so  far  as  it 
is  not  precluded  from  doing  so  by  authority,  upon  some  clearly  in- 
telligible ground,  and  introduce  no  more  nice  and  perplexing  dis- 
tinctions. I  think  that  the  true  rule  to  be  applied  in  this  state  is, 
that  when  the  chattel  is  in  existence,  so  as  not  to  be  governed  by 
Parsons  v.  Loucks  (supra),  the  contract  should  be  deemed  to  be  one 
of  sale,  even  though  it  may  have  been  ordered  from  a  seller  who  is 
to  do  some  work  upon  it  to  adapt  it  to  the  uses  of  the  purchaser.  Such 
a  rule  makes  but  a  single  distinction,  and  that  is  between  existing 
and  noncxisting  chattels.  There  will  still  be  border  cases  where  it 
will  be  difficult  to  draw  the  line,  and  to  discover  whether  the  chat- 


SALES  293 

tels  are  in  existence  or  not.  The  mass  of  the  cases  will,  however, 
readily  be  classified.  If,  on  further  discussion,  the  rule  in  Lee  v. 
Griffin  should  be  found  most  desirable  as  applicable  to  both  kinds 
of  transactions,  a  proper  case  will  be  presented  for  the  consideration 
of  the  legislature. 


C.     Statute  of  Frauds. 

I.     Application  in  General  to  Contracts  of  Sale. 

Bird  V.  Munroe.  66  Me.  ^37- 

On  March  2,  Munroe  orally  agreed  to  buy  from  Bird  and  Com- 
pany 5000  tons  of  ice.  On  March  10,  Munroe  temporarily  pre- 
vented delivery.  On  March  24,  the  parties  put  their  previous 
verbal  contract  into  writing  and  on  the  same  day  the  plaintiffs  sold 
the  ice  to  another  party,  retaining  their  claim  for  damages  against 
Munroe,  which  they  now  try  to  enforce  by  suit. 

Held,  that  a  previous  oral  contract  reduced  to  writing  is  en- 
forceable although  the  writing  is  not  made  at  the  time  of  the 
original  contract. 

Peters,  J. 

The  point  raised  is,  whether,  in  view  of  the  statute  of  frauds,  the 
writing  in  this  case  shall  be  considered  as  constituting  the  contract 
itself  or  at  any  rate  any  substantial  portion  of  it,  or  whether  it  may 
be  regarded  as  merely  the  necessary  legal  evidence  by  means  of  which 
the  prior  unwritten  contract  may  be  proved.  In  other  words,  is 
the  writing  the  contract,  or  only  evidence  of  it?  We  incline  to  the 
latter  view. 

The  peculiar  wording  of  the  statute  presents  a  strong  argument 
for  such  a  determination.  The  section  reads :  "No  contract  for 
the  sale  of  any  goods,  wares,  or  merchandise,  for  thirty  dollars  or 
more,  shall  be  valid,  unless  the  purchaser  accepts  and  receives  part 
of  the  goods,  or  gives  something  in  earnest  to  bind  the  bargain, 
or  in  part  payment  thereof,  or  some  note  or  memorandum  thereof 
is  made  and  signed  by  the  party  to  be  charged  thereby,  or  his  agent." 
In  the  first  place,  the  statute  does  not  go  to  all  contracts  of  sale, 
but  only  to  those  where  the  price  is  over  a  certain  sum.  Then, 
the  requirement  of  the  statute  is  in  the  alternative.  The  contract 
need  not  be  evidenced  by  writing  at  all,  provided  "the  purchaser 
accepts  and  receives  a  part  of  the  goods,  or  gives  something  in 
earnest  to  bind  the  barg-am  or  in  part  payment  thereof."  If  any 
one  of  these  circumstances  will  as  effectually  perfect  the  sale  as  a 
writing  would,  it  is  not  easily  seen  how  the  writing  can  actually 
constitute  the  contract,  merely  because  a  writing  happens  to  exist. 
It  could  not  with  any  correctness  be  said,  that  anything  given  in 


294  COMMERCIAL   LAW    CASES 

earnest  to  bind  a  bargain  was  a  substantial  part  of  the  bargain  itself, 
or  anything  more  than  a  particular  mode  of  proof.  Then,  it  is  not 
the  contract  that  is  required  to  be  in  writing,  but  only  "some  note 
or  memorandum  thereof."  This  language  supposes  that  the  verbal 
bargain  may  be  first  made,  and  a  memorandum  of  it  given  after- 
wards. It  also  implies  that  no  set  and  formal  agreement  is  called 
for.  "The  instrument  is  liberally  construed  without  regard  to  forms." 
The  briefest  possible  forms  of  a  bargain  have  been  deemed  sufficient 
in  many  cases.  Certain  important  elements  of  a  completed  contract 
may  be  omitted  altogether.  For  instance,  in  this  state,  the  con- 
sideration for  the  promise  is  not  required  to  be  expressed  in  writing. 
Again,  it  is  provided  that  the  note  or  memorandum  is  sufficient,  if 
signed  only  by  the  person  sought  to  be  charged.  One  party  may 
be  held  thereby  and  the  other  not  be.  There  may  be  a  mutuality 
of  contract  but  not  of  evidence  or  of  remedy.  Still,  if  the  writing 
is  to  be  regarded  in  all  cases  as  constituting  the  contract,  in  many 
cases  there  would  be  but  one  contracting  party. 

Another  idea  gives  weight  to  the  argument  for  the  position 
advocated  by  the  plaintiffs ;  and  that  is,  that  such  a  construction  of 
the  statute  upholds  contracts  according  to  the  intention  of  parties 
thereto,  while  it,  at  the  same  time,  fully  subserves  all  the  purposes 
for  which  the  statute  was  created.  It  must  be  borne  in  mind  that 
verbal  bargains  for  the  sale  of  personal  property  are  good  at  com- 
mon law.  Nor  are  they  made  illegal  by  the  statute.  Parties  can 
execute  them  if  they  mutually  please  to  do  so.  The  object  of  the 
statute  is  to  prevent  perjury  and  fraud.  Of  course,  perjury  and 
fraud  cannot  be  wholly  prevented;  but,  as  said  by  Bigelow,  J.,  "a 
memorandum  in  writing  will  be  as  effectual  against  perjury,  although 
signed  subsequently  to  the  making  of  a  verbal  contract,  as  if  it  had 
been  executed  at  the  moment  when  the  parties  consummated  their 
agreement  by  word  of  mouth."  We  think  it  would  be  more  so.  A 
person  would  be  likely  to  commit  himself  in  writing  with  more  care 
and  caution  after  time  to  take  a  second  thought. 

A  distinction  is  attempted  to  be  set  up  between  the  meaning 
to  be  given  to  [that  portion  of  the  statute]  where  it  is  provided  that 
no  unwritten  contract  for  the  sale  of  goods  "shall  be  valid,"  and 
that  to  be  given  to  the  several  preceding  sections  where  it  provided 
that  upon  certain  other  kinds  of  unwritten  contracts  "no  action 
sliall  be  maintained;"  the  position  taken  being  that  in  the  former 
case  the  contract  is  void,  and  in  the  other  cases  only  voidable  per- 
haps, or  not  enforceable  by  suit  at  law.  But  the  distinction  is  with- 
out any  essential  difference,  and  is  now  so  regarded  by  authors  gen- 
erally and  in  most  of  the  decided  cases.  All  the  sections  referred 
to  rert  upon  precisely  the  same  policy.  Exactly  the  same  object  is 
a-.med  at  in  all.  The  difference  of  phraseology  in  the  different  sec- 
tions of  the  original  English  statute,  of  which  ours  is  a  substantial 
copy,  may  perhaps  be  accounted  for  by  the  fact,  as  is  generally 
conceded,  that  the  authorship  of  the  statute  was  the  work  of  different 


SALES  295 

hands.  Although  our  statute  uses  the  words  "no  contract  shall  be 
valid,"  our  previous  statute  used  the  phrase  "shall  be  allowed  to  be 
good;"  and  the  change  was  made  when  the  statutes  were  revised 
without  any  legislative  intent  to  make  an  alteration  in  the  sense  of 
the  section.  The  two  sets  of  phrases  were  undoubtedly  deemed 
to  be  equivalent  expressions.  The  words  of  the  original  English 
section  are,  "shall  not  be  allowed  to  be  good,"  meaning,  it  is  said, 
not  good  for  the  purpose  of  sustaining  an  action  thereon  without 
written  proof, 

2.    Nature  of  Memorandum  Required. 

Brown  v.  Whipple.   38  N.  H.  22<). 

Whipple  wTOte  Brown  asking  for  terms  on  twenty  thousand 
feet  of  maple  planking.  Brown  gave  his  terms  orally  and  the 
parties  afterwards  made  a  memorandum  of  the  transaction  signed 
by  Whipple  only.  Brown  sues  Whipple  for  failure  to  take  deliv- 
ery of  the  lumber. 

Held,  that  while  several  writings  may  constitute  the  memoran- 
dum, all  the  essential  terms  of  the  contract  must  be  expressed 
therein. 

Doe,  C.  J. 

The  general  rule  is,  that  collateral  papers,  adduced  to  supply 
the  defect  of  signature  of  a  written  agreement,  should  on  their  face 
sufficiently  demonstrate  their  reference  to  such  agreement  without 
the  aid  of  parol  proof.  Unless  the  essential  terms  o'f  the  sale  can 
be  ascertained  from  the  writing  itself,  or  by  reference  in  it  to  some- 
thing else,  the  writing  is  not  a  compliance  with  the  statute ;  and  if 
the  agreement  be  thus  defective,  it  cannot  be  supplied  by  parol 
proof,  for  that  would  at  once  introduce  all  the  mischiefs  which  the 
statute  was  intended  to  prevent.  A  defective  reference  can  no  more 
be  cured  by  parol  than  any  other  defective  part  of  the  memorandum. 

The  writing,  called  in  this  case  the  defendant's  memorandum, 
is  insufficient  because,  if  it  is  signed  by  the  defendant,  and  if  it  shows 
that  he  bought  lumber  of  some  one,  it  does  not  show  of  whom  he 
bought  it.  The  defendant's  letter  of  inquiry  is  insufficient  because 
it  does  not  show  that  he  bought  or  agreed  to  buy  anything  of  any- 
body. If  the  necessary  memorandum  were  described  in  the  statute 
as  a  scintilla  of  proof  of  the  essentials  of  the  bargain,  and  if  the 
question  were  whether,  in  fact,  the  plaintiff  is  the  person  with  whom 
the  defendant  contracted,  one  question  of  law  would  be,  whether 
the  defendant's  memorandum  and  letter  (with  or  without  other  evi- 
dence) are  competent  for  the  consideration  of  a  jury.  But  the  ques- 
tion is,  not  whether  there  is  an  infinitesimal  or  other  amount  of 
circumstantial  evidence   from  which  a  jury  may  find  the   fact  not 


296  COMMERCIAL   LAW    CASES 

Stated  in  the  writings,  but  whether  the  court  does  find,  upon  a  fair 
legal  construction  of  the  writings,  that  the  fact  is  stated  in  them. 
Taken  together,  with  all  the  meaning  that  is  expressed,  and  all  that 
can  be  implied  by  the  most  strained  construction  in  favor  of  the 
plaintiff,  the  defendant's  memorandum  and  letter  state  that  at  some 
time  the  defendant  agreed  to  buy  of  somebody  15,000  feet  of  clear 
rock  maple  boards  of  certain  dimensions,  to  be  delivered  at  the  rail- 
road track,  at  $20  a  thousand;  and  that,  on  the  21st  day  of  December, 
1867,  the  defendant  inquired  of  the  plaintiff,  by  letter,  whether  he 
could  get  for  the  defendant  20,000  feet  of  the  best  maple  lumber  the 
coming  winter,  saw  it  in  the  winter  or  spring,  and  deliver  it  at  the 
depot  at  the  plaintiff's  place  the  next  July — and  at  what  price  the 
plaintiff  would  do  this.  We  do  not  think  the  legal  import  of  this 
statement  is  that  the  plaintiff  is  the  person  with  whom  the  defendant 
contracted. 

A  memorandum  (consisting  of  one  or  more  writings)  may  be 
read,  like  other  documents,  in  the  light  of  the  circumstances  in  which 
it  was  written,  for  the  explanation  of  its  latent  ambiguities,  and 
the  application  of  its  terms  to  the  persons  and  things  sufficiently 
described  in  it.  But  this  rule  does  not  admit  parol  evidence  to 
supply  an  essential  part  of  the  contract,  the  omission  of  which  is 
patent  on  the  face  of  the  memorandum.  And  the  inequitable  opera- 
tion of  the  statute  is  not  to  be  avoided  by  a  narrow  construction 
of  the  law,  or  a  liberal  construction  of  the  memorandum.  Argu- 
ments from  inconvenience  and  injustice  sometimes  tend  to  show 
the  lawmakers'  intention.  But  there  is  no  reason  to  fear  that,  in 
this  country  as  well  as  in  England,  the  favor  with  which  some 
statutes,  and  the  dislike  with  which  others,  have  been  regarded  by 
courts,  have  enlarged  the  distinction  between  strict  and  loose  con- 
struction, without  reference  to  the  legislative  intent,  and  introduced 
a  variable  standard  that  exposes  the  province  of  the  legislature  to 
judicial  invasion. 

3.    What  the  Memorandum  Must  Contain. 

Reigart  v.  Manufacturers  Coal  and  Coke  Company.  2iy  Mo. 
142. 

The  Manufacturers  Coal  and  Coke  Company  agreed  to  sell 
coal  at  a  certain  price  to  Reigart  for  use  in  his  business  for  a 
period  of  five  years.  No  consideration  was  specified  in  the  memo- 
randum, and  upon  a  suit  by  Reigart  for  failure  to  deliver  coal 
under  the  contract,  the  defense  is  made  that,  as  no  consideration 
was  specified,  the  memorandum  does  not  satisfy  the  statute  of 
frauds. 

Held,  that  the  memorandum  must,  in  Missouri,  state  the  con- 
sideration and  must  contain  the  terms  of  the  contract. 


SALES  297 

Woodson,  J. 

The  word  "contract"  as  used  in  the  statute  includes  all  of  the 
terms  and  provisions  of  the  agreement  entered  into  between  the 
parties,  and  not  a  part  of  them  only,  but  all  of  them.  If  that  statute 
had  provided,  or  if  it  was  the  meaning  thereof,  that  only  a  part  of 
the  terms  of  the  contract  should  be  reduced  to  writing  and  not 
all  of  them,  then  the  statute  would  be  without  force  or  meaning,  for 
the  reason  that  at  common  law  the  same  thing  could  have  been 
done,  that  is,  as  before  stated,  at  common  law  if  the  contract  was 
incomplete  on  its  face,  oral  evidence  was  admissible  to  supply  the 
omissions. 

The  statute  was  not  declaratory  of  the  common  law,  but  was 
highly  remedial,  intending  to  prevent  fraud  and  perjury  by  chang- 
ing the  common  law  in  that  regard,  by  requiring  that  all  of  the 
terms  of  the  contract  should  be  reduced  to  writing  before  an  action 
could  be  maintained  thereon.  And  what  has  been  here  said  is 
reinforced  and  made  clearer  by  reverting  to  the  common  law,  which 
conclusively  presumes  that  the  written  contract  is  the  receptacle 
for  and  contains  all  the  terms  of  the  agreement,  and  which  prevents 
the  introduction  of  parol  evidence  in  any  manner  to  change,  add 
to  or  take  from  the  written  contract,  except  where  the  written 
contract  itself  showed  upon  its  face  that  parts  of  it  were  omitted 
therefrom. 

The  legislature,  by  this  statute,  intended  to  wipe  out  that  ex- 
ception and  prevent  an  action  from  being  maintained,  even  though 
the  omission  appeared  on  the  face  of  the  contract.  That  was  its 
very  object  and  purpose  and  none  other. 

It  necessarily  follows  that  the  contract  price  and  the  considera- 
tion of  the  contract  must  be  stated  in  the  written  contract  along 
with  all  the  other  terms  thereof,  and  it  cannot  be  shown  by  parol 
evidence. 

I  am  fully  aware  and  not  unmindful  of  the  fact  that  some  of 
the  cases  hold  that  under  the  statute  of  frauds  it  is  not  necessary 
that  the  consideration  of  the  agreement  should  be  stated  in  writing; 
nor  am  I  unmindful  that  some  of  the  opinions  so  holding  were 
written  by  some  of  the  greatest  jurists  and  brightest  minds  that 
ever  adorned  this  bench. 

Notwithstanding  the  great  ability  and  learning  of  all  of  these 
distinguished  jurists,  I  respectfully  submit  that  they,  and  each  of 
them,  either  overlooked  the  provision  of  the  statute  before  quoted, 
and  the  evils  that  existed  at  common  law  which  the  statute  was  in- 
tended to  remedy,  and  applied  the  common  law  rule  instead  of 
the  statute ;  or,  if  the  statute  was  considered  in  those  cases,  then 
they  so  interpreted  it  as  to  make  it  declaratory  of  the  common  law 
in  its  fullest  sense  without  changing  a  word  or  dotting  an  "i,"  and 
thereby  left  existing  in  full  force  the  very  evils  the  statute  was  in- 
tended to  abolish. 


298  COMMERCIAL    LAW    CASES 

4.     What  Constitutes  Acceptance  and  Receipt. 

Rodger s  v.  Phillips.  40  N.  Y.  ^ig. 

Rodgers  and  Luther  orally  agreed  to  sell  Phillips  and  Oakley 
coal  to  the  value  of  about  $650.  They  delivered  the  coal  to  a 
common  carrier  and  forwarded  a  bill  of  lading.  The  boat  on 
which  the  coal  was  loaded  sank  and  the  coal  was  a  total  loss. 
The  defendants  contend  that  there  was  no  such  acceptance  and 
receipt  by  them  as  to  make  them  liable  for  the  price  of  the  coal. 

Held,  that  delivery  to  a  carrier  does  not  constitute  acceptance 
and  receipt,  unless  the  carrier  is  designated  by  the  purchaser. 

Daniels,  J. 

The  disposition  which  should  now  be  made  of  the  controversy 
will  depend  entirely  upon  the  sufficiency  of  the  evidence  given 
upon  the  trial  to  establish  the  fact  that  the  coal  had  been  delivered 
to  and  accepted  by  the  defendants.  The  contract  for  the  sale  of 
it  was  within  the  statute  of  frauds;  and  on  that  account,  as  it  was 
not  in  writing,  and  nothing  had  been  paid  upon  it,  by  the  direct 
terms  of  that  statute  it  was  void.  Although  the  plaintififs  did  per- 
form all  that  would  have  been  requisite  to  transfer  the  title  to  the 
coal  to  the  purchasers,  under  the  well  established  rule  of  the  common 
law,  it  does  not  follow  that  what  they  did  would  be  attended  with 
the  same  result  under  the  rule  prescribed  by  the  statute.  Where  a 
valid  and  subsisting  contract  for  the  sale  of  personal  property  may 
be  shown  to  exist,  and  by  its  terms  the  property  is  to  be  shipped  by 
the  vendor  to  the  vendee,  then  a  delivery  of  it  to  a  responsible 
carrier  for  the  vendee,  to  be  carried  and  delivered  to  him,  will 
ordinarily  transfer  the  title  to  the  vendee  and  place  the  property 
at  his  risk.  But  this  rule  requires  that  the  contract  between  the 
parties  shall  be  at  the  time  legal,  valid  and  subsisting.  It  does  not 
include  cases  like  the  present  one,  where,  on  account  of  a  failure 
to  comply  Vvith  the  positive  rule  prescribed  by  the  statute,  the 
contract  is  void,  and  must  remain  so  until  some  act  has  been  per- 
formed that  will  have  the  effect  of  giving  it  legal  validity.  In 
cases  like  the  present  one,  it  is  the  statute,  and  not  the  common  law, 
that  has  provided  the  mode  by  which  the  previously  void  agreement 
could  be  rendered  legal  and  binding  upon  the  parties.  And  that 
mode  must  be  pursued;  otherwise,  the  agreement  must  remain  with- 
out any  binding  force  upon  either  of  the  parties.  Until  that  may 
be  done,  the  contract  must  remain  entirely  optional  on  the  part 
of  each  of  the  parties.  Even  if  the  vendors  elected  to  perform  it, 
and  deliver  the  property  precisely  as  they  had  agreed  to,  it  was 
still  optional  with  the  vendees  whether  they  would  receive  it  or  not. 
And  even  if  the  former  went  so  far  as  to  actually  deliver  it,  the 
vendees  still  had  their  election  to  either  receive  or  refuse  it. 

This  statute  is  in  substance  the  same  as  the  previously  exist- 


SALES  299 

ing  English  statute,  and  they  have  both  been  regarded  as  identical 
in  the  change  they  have  produced  in  the  common  law  rule. 

By  the  construction  they  have  received,  and  which  their  lan- 
guage manifestly  required,  a  mere  delivery  of  the  property  con- 
tracted to  be  sold  by  the  terms  of  the  void  contract,  has  been  held 
to  be  insufficient  to  vest  the  title  to  it  in,  or  place  it  at  the  risk 
of,  the  vendee.  But,  beyond  that,  it  became  necessary  under  the  rule 
adopted  by  the  statute  that  some  part  of  the  property  should  not  only 
be  delivered  and  received  by  the  vendee,  but  that  it  should  also  be 
accepted  by  him.  This  acceptance  of  it  involved  something  more 
than  the  act  of  the  vendor  in  the  delivery.  It  required  that  the 
vendee  should  also  act,  and  that  his  act  should  be  of  such  a  nature 
as  to  indicate  that  he  received  and  accepted  the  goods  delivered  as 
his  property.  He  must  receive  and  retain  the  articles  delivered, 
intending  thereby  to  assume  the  title  to  them  to  constitute  the  ac- 
ceptance mentioned  in  the  statute;  when  that  has  been  done,  then, 
for  the  first  time,  the  void  contract  becomes  valid  and  obligatory  upon 
the  parties  to  it. 

The  question  in  this  case,  therefore,  is  whether  such  an  ac- 
ceptance of  the  coal  by  the  defendants  was  shown  as  placed  it 
at  their  risk  at  the  time  when  it  was  lost  by  the  sinking  of  the 
vessel  it  was  laden  upon.  And,  for  the  purpose  of  considering  and 
deciding  it,  this  case  must  be  distinguished  from  those  where  the 
property  contracted  to  be  sold  was  delivered  to  a  particular  carrier 
designated  and  selected  by  the  vendee  for  the  purpose  of  receiving  and 
accepting  it.  For,  in  those  cases,  the  carrier  by  the  act  of  the  vendee 
became  his  agent,  and  bound  him  by  the  receipt  and  acceptance  of  the 
property.  This  case  differs  from  those  in  the  circumstance  that  no 
such  designation  or  selection  was  made  by  the  defendants.  The 
carrier  to  whom  the  property  was  delivered  to  be  carried  to  the 
defendants  was  selected  by  the  plaintiffs.  The  defendants  in  no 
manner  authorized  or  participated  in  it,  beyond  the  void  authority 
conferred  by  the  terms  of  their  void  contract.  Being  void,  as  it 
was,  the  plaintiffs  could  not  avail  themselves  of  its  terms,  for  the 
purpose  of  binding  or  concluding  the  defendants  by  what  they  did 
under  it.  Whatever  they  did  towards  the  performance  of  the  con- 
tract they  did  for  themselves,  and  at  their  own  risk,  until  the  de- 
fendants elected  to  change  the  risk,  and  did  change  it,  by  the  ac- 
ceptance of  the  property  mentioned  in  the  statute ;  what  the  evidence 
showed  was  a  selection  of  the  carrier  by  the  plaintiffs,  and  a  de- 
livering of  the  coal  to  him,  not  an  acceptance  of  it  by  the  defendants. 
That  acceptance  required  some  act  on  the  part  of  the  vendees  to 
constitute  it,  performed  after  the  coal  had  been  separated  from  the 
mass  and  placed  in  such  a  condition  as  rendered  that  particular 
quantity  capable  of  being  accepted  by  the  defendants.  The  evidence 
not  only  failed  to  show  the  performance  of  any  act  of  acceptance 
on  the  part  of  the  defendants,  but  beyond  that,  it  appeared  that  they 
did  not  hear  of  its  shipment  until  the  vessel  it  was  laden  upon  had 


300  COMMERCIAL    LAW    CASES 

sunk  to  the  bottom  of  the  Schuylkill.  There  was  nothing,  therefore, 
in  the  case  from  which  the  defendants  could  be  deemed  to  have 
accepted  the  coal  at  that  time.  It  consequently  continued  to  be  the 
plaintiffs'  property,  remaining  at  their  risk,  and  it  was  their  loss 
when  the  vessel  sunk,  after  it  had  been  laden  on  board  of  her.  And 
if  the  carrier  became  liable  for  the  loss,  his  liability  was  to  the  plain- 
tiffs, not  to  the  defendants.  That  a  mere  delivery  of  property  to  a 
carrier  selected  to  receive  and  carry  it  by  the  vendors,  will  in  no 
legal  sense  constitute  an  acceptance  of  it  by  the  vendee,  and  for  that 
reason,  exclude  the  case  from  the  operation  of  the  statute,  has  been 
distinctly  held  in  several  adjudged  and  well  considered  decisions. 

5.     Constructive  Acceptance  and  Receipt. 

Beedy  v.  Braman  Wooden  Ware  Co.   108  Me.  200. 

Beedy  agreed  to  sell  the  defendant  five  tons  of  hay  at  his 
barn  at  $17  per  ton.  Pursuant  to  the  agreement,  he  took  five 
tons  of  hay  out  of  his  barn  and  placed  it  where  the  defendant 
could  easily  remove  it.  Shortly  afterward,  the  defendant  dis- 
continued business,  refused  to  take  the  hay,  and  requested  Beedy 
to  see  if  he  could  not  dispose  of  it  to  Beal,  who  declined  to  pur- 
chase. Beedy  sues  for  the  price  of  the  hay.  The  defendant 
pleads  the  statute  of  fratids,  claiming  that  there  was  no  acceptance 
and  receipt  of  the  hay. 

Held,  that  if  the  defendant  exercised  powers  of  ownership  over 
the  articles  sold,  that  constitutes  acceptance  and  receipt. 

Bird,  J. 

There  may  be  a  complete  delivery  at  common  law  without  either 
receipt  or  acceptance  under  the  statute.  The  former  is  the  act  of 
the  vendor,  while  receipt,  which  affects  the  possession,  and  accept- 
ance, which  affects  the  title,  are  the  acts  of  the  purchaser  and  both 
receipt  and  acceptance  are  essential.  Nor  can  such  receipt  and 
acceptance  be  shown  by  words  alone,  where  such  words  are  part 
of  the  alleged  oral  bargain  and  sale.  But  receipt  and  acceptance 
need  not  be  contemporaneous  with  the  alleged  contract,  if  made  in 
pursuance  of  it,  nor  need  they  be  simultaneous.  The  former  may  pre- 
cede or  follow  the  latter.  No  act  of  the  vendor  alone  can  be  effective 
to  make  delivery,  without  receipt  and  acceptance,  take  the  case  out 
of  the  statute.  If  the  vendee  does  any  act  to  the  goods,  of  wrong  if 
he  be  not  their  owner,  and  of  right  if  he  be  their  owner,  the  doing 
of  the  act  is  evidence  that  he  has  accepted  them. 

In  the  case  at  bar,  the  alleged  bargain  and  sale  was  not  of  cer- 
tain specified  goods  selected  and  accepted  by  the  purchaser  or  its 
agent  but  of  a  certain  quantity  of  goods  to  be  selected  by  the  vendors 
from  a  larger  mass.  The  separation  of  the  hay  alleged  to  have  been 
purchased   and   its   deposit   outside   the   barn   were   the   acts   of   the 


SALES  301 

vendors.  Although,  from  the  evidence  as  to  the  manner  of  pay- 
ment and  the  subsequent  relation  of  the  vendors  to  the  property, 
we  think  no  lien  for  the  price  was  retained,  it  is  needless  to  state  that 
neither  receipt  nor  acceptance  can  be  found  from  such  acts  of  the 
vendors. 

It  is  uncontradicted  that  defendant  directed  its  agent  to  offer 
the  hay  for  sale  to  a  certain  party  who  refused  the  offer.  Clearly 
constructive  acceptance  and  receipt  may  arise  from  dealing  with 
the  goods  as  owner,  as  by  the  purchaser  reselling  or  pledging  the 
goods.  The  first  case  of  this  character  is  one  where,  a  stack  of 
hay  being  sold  by  parol  to  the  defendant,  he,  without  paying  for  it 
or  removing  it,  resold  a  part  of  it  to  another  who  took  it  away. 
And  Kenyon,  J.,  speaking  for  the  Court  of  King's  Bench  says,  ''Here 
the  defendant  dealt  with  the  commodity  afterwards,  as  if  it  were 
in  his  actual  possession,  for  he  sold  part  of  it  to  another  person." 
A  resale  is  evidence  of  a  constructive  receipt  as  well  as  of  con- 
structive acceptance. 

In  reason  we  fail  to  distinguish  between  a  sale  and  an  offer 
to  sell.  There  is  no  difference  in  so  far  as  the  act  of  the  alleged 
purchaser  is  concerned.  He  does  no  more  than  offer  the  goods  in 
either  case.  Whether,  when  he  has  made  the  offer,  his  offer  becomes 
a  sale  in  fact  depends  upon  the  action  of  a  party  who  bears  no 
relation  to  the  parties,  inter  se,  to  the  original  alleged  sale.  In 
either  case  his  act  is  equally  an  assertion  of  ownership. 

We  conclude  that  upon  the  uncontradicted  evidence  we  must 
find  such  an  acceptance  and  receipt  of  the  hay  as  satisfies  the 
requirements  of  the  statute  of  frauds. 

6.     Necessity  of  Act  Indicative  of  Acceptance  and  Receipt. 

Shindler  v.  Houston,   i  N.   Y.  261. 

Houston  owned  maple  lumber  which  he  had  brought  to  Troy 
on  a  boat  and  had  piled  on  the  dock  apart  from  any  other  lumber. 
Soon  afterward,  Shindler  agreed  to  buy  it  from  him  for  $52  and 
Houston  said  to  him,  "The  lumber  is  yours."  Later  Shindler 
refused  to  take  the  lumber  and  Houston  sues  for  the  price. 

Held,  that  acceptance  and  receipt  of  part  of  the  goods  sold 
necessitates  an  actual  delivery  in  order  to  take  the  case  out  of 
the  statute. 

Branson,  J. 

If  we  assume  the  sale  was  in  all  other  respects  complete,  the 
difficulty  still  remains  that  there  was  no  delivery  of  the  goods. 
Nothing  was  done.  There  was  nothing  but  mere  words;  and  the 
statute  plainly  requires  something  more;  it  calls  for  acts.  A  writing 
must  be  made,  part  of  the  purchase  money  must  be  paid,  or  the 
buyer  must  accept  and  receive  part  of  the  goods.     Mere  words  of 


302  COMMERCIAL    LAW    CASES 

contract,  unaccompanied  by  any  act,  cannot  amount  to  a  delivery. 
To  hold  otherwise  would  be  repealing  the  statute. 

There  may  be  a  delivery  without  handling  the  property,  or  chang- 
ing its  position.  But  that  is  only  where  the  seller  does  an  act  by 
which  he  relinquishes  his  dominion  over  the  property,  and  puts  it 
in  the  power  of  the  buyer;  as  by  delivering  the  key  of  the  ware- 
house in  which  the  goods  are  deposited,  or  directing  a  bailee  of 
the  goods  to  deliver  them  to  the  buyer,  with  the  assent  of  the  bailee 
to  hold  the  property  for  the  new  owner.  In  such  case  there  is, 
in  addition  to  the  words  of  bargain,  an  act  by  which  the  dominion 
over  the  goods  is  transferred  from  the  seller  to  the  buyer.  Here 
there  was  no  delivery  either  actual  or  symbolical. 

7.    Acceptance  Must  Be  Under  the  Contract. 

At  her  ton  v.  Newhall.   12  s  Mass.  141. 

Newhall  called  at  the  plaintiffs'  store  in  Boston  and  said  he 
would  take  those  hides  which  wxre  adapted  to  nis  purpose  out  of 
a  lot  of  800.  After  he  had  gone,  over  600  of  these  were  set  aside, 
weighed  and  marked  with  his  name.  An  expressman  delivered  90 
of  the  600  hides.  Immediately  thereafter,  the  undelivered  leather 
was  destroyed  in  the  Great  Fire.  Newhall  at  once  notified  the 
plaintiffs  that  he  would  take  only  those  hides  actually  delivered. 

Held,  that  according  to  the  Massachusetts  rule,  although  a  part 
of  the  goods  purchased  may  be  accepted  and  received,  they  must 
be  accepted  as  a  part  of  the  contract  in  order  to  take  the  entire 
contract  out  of  the  operation  of  the  statute  of  fratids. 

Gray,  C.  J. 

It  is  unnecessary  to  consider  whether  there  was  a  sufficient  de- 
livery to  complete  the  sale,  because  it  is  quite  clear,  upon  the  authori- 
ties, that  there  was  no  such  acceptance  and  receipt  of  part  of  the 
goods  as  would  satisfy  the  statute  of  frauds.  Such  acceptance  must 
he  by  the  buyer  himself,  or  by  some  one  authorized  to  accept  in  his 
behalf.  The  acts  of  the  buyer  on  Saturday  did  not  constitute  such 
an  acceptance,  because,  according  to  the  seller's  own  testimony,  the 
buyer  merely  agreed  to  take  all  the  sides  of  leather  of  a  certain 
thickness,  which  were  not  then  set  ai)art  by  themselves,  but  formed 
part  of  a  large  pile  from  which  they  were  afterwards  to  be  selected 
by  the  seller.  The  receipt  of  part  of  the  leather  by  the  expressman 
(lid  not  constitute  such  an  acceptance,  because  he  was  not  authorized 
to  accept  so  as  to  bind  the  buyer.  The  acceptance  by  the  buyer  on 
Monday  of  the  part  brought  by  the  expressman  was  not  sufficient 
acceptance  to  take  the  sale  of  the  whole  out  of  the  statute,  because 
it  appears  that  it  was  not  with  an  intention  to  perform  the  whole 
contract  and  to  assert  the  buyer's  ownership  under  it,  but,  on  the 


SALES  303 

contrary,   that  he   immediately   informed   the   seller's   clerk   that   he 
would  be  responsible  only  for  the  part  received. 

8.     Amount  Received  Not  Material. 

Garfield  v.  Paris,  pd  U.  S.  557. 

Paris,  Allen  &  Company  sold  Garfield,  one  of  the  defendants, 
about  $4,000  worth  of  liquor  in  accordance  with  negotiations 
between  the  parties  in  New  York.  While  the  defendants  were 
in  New  York,  labels  for  the  bottles  were  delivered  to  them.  The 
plaintiffs  contend  that  this  took  the  case  out  of  the  statute  of  frauds 
as  it  constituted  acceptance  and  receipt  of  part  of  the  goods  sold. 

Held,  that  the  amount  of  goods  received  and  accepted  is  not 
material. 

Clifford,  J. 

Such  a  contract  must  be  in  writing,  or  there  must  be  some  note 
or  memorandum  of  the  same  to  be  subscribed  by  the  party  to  be 
charged :  but  the  statute  concedes  that  the  party  becomes  liable  for 
the  whole  amount  of  the  goods,  if  he  accepts  and  receives  part  of 
the  same,  or  the  evidences,  or  some  of  them,  of  such  things  in  action ; 
and  the  authorities  agree  that,  where  the  question  is  "whether  the 
contract  has  been  fulfilled,  it  is  sufficient  to  show  an  acceptance  and 
actual  receipt  of  a  part,  however  small,  of  the  thing  sold,  in  order 
that  the  contract  may  be  held  to  be  good,  even  though  it  does  not 
preclude  the  purchaser  from  refusing  to  accept  the  residue  of  the 
goods,  if  it  clearly  appears  that  they  do  not  conform  to  the  contract. 

"Accept  and  receive"  are  the  words  of  the  statute  in  question; 
but  the  law  is  well  settled,  that  an  acceptance  sufficient  to  satisfy 
the  statute  may  be  constructive,  the  rule  being  that  the  question  is 
for  the  jury  whether  the  circumstances  proved,  of  acting  or  for- 
bearing to  act,  do  or  do  not  amount  to  an  acceptance  within  the 
statute. 

Questions  of  the  kind  are  undoubtedly  for  the  jury;  and  it  is 
well  settled  that  any  acts  of  the  parties  indicative  of  ownership 
by  the  vendee  may  be  given  in  evidence  to  show  the  receipt  and 
acceptance  of  the  goods  to  take  the  case  out  of  the  statute  of  frauds. 
Conduct,  acts,  and  declarations  of  the  purchaser  may  be  given  in 
evidence  for  that  purpose;  the  vendee  of  goods  may  so  deal  with  a 
bill  of  lading  as  to  afford  evidence  of  the  receipt  and  acceptance  of 
the  goods  therein  described. 

Where  goods  are  purchased  in  several  parcels,  to  be  paid  for 
at  a  future  day,  the  whole,  within  the  meaning  of  the  statute  of 
frauds,  constitutes  but  one-  contract,  and  the  delivery  of  part  to 
the  purchaser  is  sufficient  to  take  the  case  out  of  the  operation  of 
the  statute  of  frauds. 

Apply  the  finding  of  the  jury  in  this  case  to  the  conceded  facts, 


304  COMMERCIAL   LAW    CASES 

and  it  shows  that  the  defendants  were  in  the  situation  of  a  pur- 
chaser who  goes  to  a  store  and  buys  different  articles,  at  separate 
prices  for  each  article,  under  an  agreement  for  a  credit,  as  in  this 
case,  accepting  a  part,  but  leaving  the  bulk  to  be  forwarded  by  public 
conveyance.  Frequent  cases  of  the  kind  occur;  and  it  is  well  settled 
law  that  the  delivery  of  a  part  of  the  articles  so  purchased,  without 
any  objection  at  the  time  as  to  the  delivery,  is  sufficient  to  take  the 
case  out  of  the  statute  of  frauds  as  to  the  whole  amount  of  the  goods. 

The  delivery  in  such  a  case,  in  order  that  it  may  have  that 
effect,  must  be  made  in  pursuance  of  the  contract,  the  question 
whether  it  was  so  made  or  not  being  one  for  the  jury;  but  if  they 
find  that  question  in  the  affirmative,  then  it  follows  that  the  case 
is  taken  out  of  the  statute  of  frauds. 

Due  acceptance  and  receipt  of  a  substantial  part  of  the  goods 
will  be  as  operative  as  an  acceptance  and  receipt  of  the  whole;  and 
the  acceptance  may  either  precede  the  reception  of  the  article,  or 
may  accompany  their  reception. 

9.    What  Constitutes  Part  Payment. 

Jennings  v.  Dunham.  60  Mo.  App.  dj5. 

Jennings  &  Silvey  contracted  to  sell  Dunham  a  large  number 
of  hogs.  Each  of  the  parties  put  $50  into  the  hands  of  a  third 
party  as  a  forfeit  to  guarantee  performance  of  the  contract.  Dun- 
ham refused  to  take  the  hogs  and  the  plaintiffs  now  sue  for 
damages  arising  from  his  failure  to  do  so. 

Held,  that  the  posting  of  a  forfeit  is  not  the  same  as  part 
payment. 

Ellison,  J. 

The  first  question  presented  relates  to  the  statute  of  frauds. 
Our  statute,  section  5187,  Revised  Statutes,  1889,  provides  that  no 
sale  of  personal  property  of  the  price  of  $30  or  more,  shall  be  valid, 
unless  the  buyer  accept  and  receive  a  part  of  the  property,  "or 
give  something  in  earnest  to  bind  the  bargain,  or  in  part  payment," 
or  unless  some  written  memorandum  be  made.  There  was  no  delivery 
of  any  part  of  the  hogs  at  the  time  of  making  the  contract,  nor  was 
there  any  written  memorandum  of  the  sale ;  and  the  question  arising 
on  the  evidence  is,  was  there  a  part  payment?  It  was  shown  that 
plaintiffs  and  defendant,  at  the  making  of  the  contract,  each  placed 
the  sum  of  $50  in  the  hands  of  a  third  party,  the  plaintiffs'  theory 
at  the  trial  being  that  the  sum  put  up  by  defendant  was  to  be  a 
part  payment;  while  on  the  other  hand  there  was  evidence  in  de- 
fendant's behalf  tending  strongly  to  prove  that  each  party  respectively 
put  up  these  sums  as  a  "forfeit,"  so  that  the  party  failing  to  per- 
form his  contract  should  forfeit  the  amount  put  up  by  such  party; 
the  party  not  in  default  should  receive  the  whole  sum  put  up.     The 


SALES  305 

trial  court  instructed  the  jury  that,  if  the  money  was  placed  in  the 
hands  of  a  third  party  as  money  to  be  forfeited  by  the  defaulting 
party,  it  was  not  a  payment  and  the  contract  was  invalid.  A  literal 
reading  of  the  statute  undoubtedly  makes  a  distinction  between  some- 
thing which  is  given  in  earnest  to  bind  the  bargain,  and  that  which 
is  given  in  part  payment.  Originally  this  "earnest"  was  not  neces- 
sarily a  part  payment.  It  was  a  custom  under  the  common  law,  and 
seems  also  to  have  been  a  custom  in  other  countries  than  England 
to  give  something  to  bind  a  bargain.  In  some  countries  some  act 
was  performed.  One  species  of  earnest  in  the  Roman  law  was  a 
payment  of  a  sum  which  if  the  sale  was  carried  out  was  to  be 
credited  on  the  price,  but  which  carried  the  understanding  that  it 
was  forfeit  money  if  the  sale  was  not  completed  by  the  buyer;  and 
if  the  contract  was  not  performed  by  the  seller,  he  was  to  return 
to  the  buyer  the  money  advanced  together  with  a  like  sum  as  a  for- 
feit on  his  part.  Whether  a  sum  which  is  termed  forfeit  money  was 
ever  a  species  of  earnest  by  the  common  law  need  not  now  be  inves- 
tigated, since  it  has  ceased  to  be  of  practical  importance.  It  is 
now  considered  that  giving  something  in  earnest  to  bind  the  bar- 
gain, and  giving  something  in  payment  mean  the  same  thing;  that  is, 
a  part  payment  of  the  price.  So,  while  in  some  countries  in  olden 
times,  "earnest  to  bind  the  bargain"  might  consist  of  forfeit  money, 
it  is  not  so  now.  In  modern  times,  earnest  must  be  a  part  payment 
of  the  price.  And,  where  the  parties  to  a  contract  put  up  a  sum  of 
money  to  be  forfeited  to  the  nondefaulting  party,  it  is  not  a  part 
payment,  and  therefore  does  not  take  the  contract  out  of  the  statute 
of  frauds. 

10.     Necessity  of  Actual  Payment. 

Dow  V.  Worthen.  57  Vt.  108. 

Dow  bought  poultry  from  Hatch  &  Company  for  Worthen, 
agreeing  with  Hatch  that  a  debt  of  $75  due  Hatch  from  Dow 
should  be  extinguished  by  being  applied  as  present  part  payment 
for  the  poultry.  Worthen  refused  to  accept  the  poultry,  claim- 
ing that  the  sale  was  within  the  statute  of  frauds  and  that  Dow 
had  not  entered  into  a  binding  agreement.  The  question  arises 
whether  this  agreement  constituted  a  proper  part  payment  in  order 
to  take  the  case  out  of  the  statute  of  frauds. 

Held,  that  part  payment,  as  contemplated  by  the  statute  of 
frauds,  does  not  require  the  physical  transfer  of  money. 

Aldis,  J. 

The  part  payment  required  by  the  statute  of  frauds,  in  order 
to  make  the  contract  for  the  sale  of  goods  of  the  value  of  over 
$40  binding  on  the  parties,  does  not  require  the  actual  passing  of 
money  from  the  vendee  to  the  vendor.     But  it  must  be  of  value — 


306  COMMERCIAL    LAW    CASES 

money's  worth — and  it  must  be  agreed  by  both  parties  at  the  time 
that  the  value  is  then  actually  passed  from  the  vendee  to  the  vendor 
— that  it  is  a  then  present  payment.  It  is  not  enough  for  the  parties 
to  agree  that  it  shall  be  applied  as  payment.  That  w^ould  be  merely 
an  agreement  to  pay.  It  must  not  rest  in  agreement, — it  must  be 
pay  down.  The  payment  must  be  actually  made  and  both  parties 
must  so  understand  it; — the  vendee  that  he  pays  and  the  vendor 
that  he  receives  the  value,  and  thus  that  the  title  to  the  value  has 
passed  from  the  vendee  to  the  vendor. 

The  statute  only  requires  actual  part  payment.  It  does  not 
require  that  such  payment  shall  be  shown  by  writing — by  an  indorse- 
ment, a  credit  or  a  receipt,  or  by  the  manual  delivery  of  any  article 
or  property  of  value.  It  leaves  the  parties  to  prove  payment  by  such 
proof  as  they  may  have; — but  it  does  require  proof  of  payment,  and 
not  of  a  mere  agreement  to  pay  or  to  apply  in  payment. 


11. 

WARRANTIES. 

The  contract  of  sale  often  involves  a  subsidiary  contract  called 
a  warranty,  i.e.,  a  guaranty  that  the  goods  shall  conform  to  a 
certain  standard  or  that  certain  conditions  shall  be  fulfilled.  This 
warranty  may  be  either  express  or  implied.  Express  warranties 
of  almost  any  sort  may  be  made.  If  they  are  not  carried  out,  the 
other  party  may  refuse  to  proceed  with  the  contract,  or  in  the 
alternative  may  sue  for  breach  of  warranty.  No  form  of  words 
is  necessary  to  create  a  warranty.  It  is  usually  not  necessary 
even  that  the  vendor  shall  intend  to  warrant.  The  question  is  not 
whether  the  vendor  intended  his  statement  as  a  warranty,  but 
whether  his  intention  was  that  the  buyer  should  purchase  the  goods 
in  reliance  upon  the  statement.  A  warranty  must  in  any  event  be 
more  than  a  mere  expression  of  opinion,  and  does  not  ordinarily 
cover  known  defects,  since,  being  discoverable  by  inspection,  they 
fall  within  the  doctrine  of  "caveat  emptor,"  i.  e.,  "let  the  buyer 
beware."  A  seller  is  assumed  to  puff  his  goods.  The  seller  may 
by  express  statement,  however,  protect  the  buyer  even  against  such 
patent  defects,  as  the  buyer  may  prefer  to  rely  upon  the  warranty 
rather  than  on  his  own  judgment.  Such  a  warranty  must  in  all 
cases  be   clearly   made. 

In  addition  to  express  warranties,  there  are,  in  the  absence 
of  a  stii)ulation  to  the  contrary,  the  following  implied  general 
warranties : 

I.  That  the  seller  has  the  right  to  sell  the  goods,  or  in  the 
case  of  a  contract  to  sell,  that  he  will  have  the  right  to 
.sell    the  goods  at  the  time  when  the  title  is  to  pass; 


SALES  307 

2.  That  the  buyer  shall  have  (luiet  possession  of  the  goods 
against  the  lawful  claims  of  others; 

3.  Tliat  the  goods  shall  be  free  from  any  incumbrance  in 
favor  of  a  third  person  at  the  time  of  the  sale. 

Other  implied  warranties  are  determined  by  the  nattire  of  the 
particular  sale: 

1.  In  a  sale  by  inspection  (when  the  buyer  himself  exam- 
ines the  goods  or  has  the  opportunity  to  examine  them 
before  purchase),  there  are  no  further  implied  warranties 
unless  the  seller  is  also  the  manufacturer,  in  which  event 
there  is  a  warranty  against  latent  defects  not  apparent 
upon  reasonable  inspection. 

2.  In  a  sale  by  description  ( when  the  goods  are  delivered  by 
the  seller  to  the  buyer  tipon  an  order  without  inspection), 
there  are  in  addition  to  the  general  warranties  those  of 
merchantability,  w-hich  corresponds  roughly  to  the  idea 
of  salability,  and  that  the  goods  shall  conform  to  the 
description. 

3.  In  a  sale  by  sample,  there  are  the  following  implied  war- 
ranties : 

(a)  That  the  goods  shall  correspond  to  the  sample  in 
quality ; 

(b)  That  the  buyer  shall  have  the  opportunity  to  com- 
pare the  goods  with  the  sample  unless  they  are 
sent  C.  O.  D. ; 

(c)  That  the  goods  shall  be  merchantable  and  free  from 
defects  not  apparent  on  reasonable  examination  of 
the  sample. 

4.  There  is  no  warranty  that  the  goods  are  of  a  particular 
quality  or  fitness  for  any  special  purpose  unless  the  buyer 
makes  known  this  particular  purpose  and  relies  upon  the 
seller's  skill  and  judgment ;  imless  the  goods  are  bought 
by  description ;  or  unless  such  warranty  has  been  annexed 
by  usage  of  the  trade. 

I.     Express  and  Implied  Warranties. 

Ingraham  v.  Union  Railroad  Company,    ip  R.  I.  556. 

Ingraham  bought  a  horse  at  an  auction  at  which  the  defendant 
put  up  a  number  of  horses  for  sale,  with  the  public  statement  that 
all  horses  which  were  then  being  sold  had  been  driven  single  and 
were  safe  to  drive  single.  The  horse  was  unsafe  and  dangerous. 
Ingraham  now  sues  for  breach  of  warranty  in  this  respect. 


308  COMMERCIAL    LAW    CASES 

Held,  that  any  positive  representation  may  be  an  express  war- 
ranty. 

Tillinghast,  J. 

Any  positive  affirmation  or  representation  made  by  a  vendor 
at  the  time  of  the  sale  with  respect  to  the  subject  thereof,  which 
operates  as  an  inducement  thereto,  unless  it  be  the  expression  of  a 
mere  matter  of  opinion,  or  purely  matter  of  description,  constitutes 
a  warranty.  In  other  v.ords,  a  warranty  under  a  sale  of  personal 
property  is  a  statement  or  representation  of  fact  made  by  the  vendor 
as  to  the  character  or  quality  of  the  article  sold  or  of  the  title 
thereto,  whereby  the  vendor  promises  that  the  thing  is  or  shall  be  as 
represented.  "A  warranty  is  a  statement  of  fact  as  to  an  article 
sold,  coupled  with  an  agreement  to  make  the  statement  good."  Such 
an  agreement  may  be  expressed  or  implied.  Nor  is  any  particular 
form  of  words  necessary  to  create  a  warranty ;  any  definite  statement 
or  affirmation  as  to  the  quality  of  the  thing  sold,  made  by  the  seller 
at  the  time,  which  it  may  reasonably  be  supposed  was  intended  to 
induce  the  sale,  and  which  is  relied  on  by  the  purchaser,  may  be 
regarded  as  constituting  a  warranty;  and  if  the  vendor  at  the  time 
of  the  sale  affirms  a  fact  as  to  the  quality  of  the  thing  sold,  in  clear 
and  intelligible  language,  and  the  purchaser  buys  on  the  faith  of 
such  affirmation,  there  is  an  express  warranty,  and  the  vendor  is 
liable  in  damages  if  the  article  sold  is  not  what  it  is  represented  to 
be.  Nor  is  it  true,  as  sometimes  stated,  that  the  representation,  in 
order  to  constitute  a  warranty,  must  have  been  intended  by  the  vendor, 
as  well  as  understood  by  the  vendee,  as  a  warranty.  For  if  the 
representation  as  to  the  character  or  quality  of  the  article  sold  be 
positive,  and  not  mere  matter  of  opinion,  and  the  vendee  under- 
stands it  and  relies  upon  it  as  a  warranty,  the  vendor  is  bound 
thereby,  no  matter  whether  he  intended  it  to  be  a  warranty  or  not. 
"He  is  responsible  for  the  language  he  uses,  and  cannot  escape  lia- 
bility by  claiming  that  he  did  not  intend  to  convey  the  impression 
which  his  language  was  calculated  to  produce  in  the  mind  of  the 
vendee." 

[The  language  used  by  the  defendant's  agent]  was  equivalent 
to  an  affirmation  that  all  horses  which  should  be  then  and  there  sold 
were  kind  and  safe  to  drive  singly  unless  the  contrary  was  stated. 
If,  therefore,  the  plaintiff  purchased  the  horse  in  question  rely- 
ing upon  said  affirmation,  and  it  turned  out  that  said  horse  was 
unsafe  and  dangerous  to  drive  singly,  and  the  plaintiff  was  damaged 
thereby,  we  think  he  is  entitled  to  recover. 

2.     Dealers'  Talk. 

Vulcan  Metals  Co.  v.  Simmons  Mfg.  Co.    248  Fed.  8^j. 

The  Simmons  Manufaclurinj^f  Company  sold  the  Vulcan  Met- 
als Company  vacuum  cleaners  and  machinery  upon  representations 


SALES  309 

by  the  president  of  the  Company  that  the  cleaner  was  clean,  eco- 
nomical, efficient,  and  perfect  in  the  smallest  detail ;  that  a  child 
of  six  could  use  it ;  that  it  worked  completely  and  thoroughly ; 
and  that  it  had  never  been  placed  on  the  market.  The  cleaner 
was  in  fact  of  little  value,  and  the  Vulcan  Metals  Company  dis- 
continued its  manufacture  almost  immediately.  It  sues  for  dam- 
ages arising  from  these  representations. 

Held,  that  statements  of  value  and  general  excellence  are 
merely  dealers'  talk,  and  not  actionable ;  but  that  statements  of 
actual  experiences  with  the  subject  matter  do  not  fall  within  the 
rule. 

Hand,  Dis.  J. 

The  general  commendations  touching  the  quality  and  powers  of 
the  patented  machine  raise  the  question  of  law  how  far  general 
'"puffing"  or  "dealers'  talk"  can  be  the  basis  of  an  action  for  deceit. 

The  conceded  exception  in  such  cases  has  generally  rested  upon 
the  distinction  between  "opinion"  and  "fact;"  but  that  distinction 
has  not  escaped  the  criticism  it  deserves.  An  opinion  is  a  fact,  and 
it  may  be  a  very  relevant  fact ;  the  expression  of  an  opinion  is  the 
assertion  of  a  belief,  and  any  rule  which  condones  the  expression  of 
a  consciously  false  opinion  condones  a  consciously  false  statement 
of  fact.  When  the  parties  are  so  situated  that  the  buyer  may  rea- 
sonably rely  upon  the  expression  of  the  seller's  opinion,  it  is  no 
excuse  to  give  a  false  one.  And  so  it  makes  much  difference  whether 
the  parties  stand  "on  an  equality."  For  example,  we  should  treat 
very  differently  the  expressed  opinion  of  a  chemist  to  a  layman 
about  the  properties  of  a  composition  from  the  same  opinion  between 
chemist  and  chemist,  when  the  buyer  had  full  opportunity  to  exam- 
ine. The  reason  of  the  rule  lies,  we  think,  in  this :  There  are  some 
kinds  of  talk  which  no  sensible  man  takes  seriously,  and  if  he  does  he 
suffers  from  his  credulity.  If  we  were  all  scrupulously  honest,  it 
would  not  be  so;  but,  as  it  is,  neither  party  usually  believes  what 
the  seller  says  about  his  own  opinions,  and  each  knows  it.  Such 
statements,  like  the  claims  of  campaign  managers  before  election, 
are  rather  designed  to  allay  the  suspicion  which  would  attend  their 
absence  than  to  be  understood  as  having  any  relation  to  objective 
truth.  It  is  quite  true  that  they  induce  a  compliant  temper  in  the 
buyer,  but  it  is  by  a  much  more  subtle  process  than  through  the  ac- 
ceptance of  his  claims  for  bis  wares. 

So  far  as  concerns  statements  of  value,  the  rule  is  pretty  well 
fixed  against  the  buyer.  It  has  been  applied  more  generally  to  state- 
ments of  quality  and  serviceability. 

In  the  case  at  bar,  since  the  buyer  was  allowed  full  opportu- 
nity to  examine  the  cleaner  and  to  test  it  out,  we  put  the  parties 
upon  an  equality.  It  seems  to  us  that  general  statements  as  to  what 
the  cleaner  would  do,  even  though  consciously  false,  were  not  of  a 
kind  to  be  taken  literally  by  the  buyer.     As  between  manufacturer 


3IO  COMMERCIAL    LAW    CASES 

and  customer,  it  may  not  be  so;  but  this  was  the  case  of  taking  over 
a  business,  after  ample  chance  to  investigate.  Such  a  buyer,  wlio 
the  seller  rightly  expects  will  undertake  an  independent  and  ade- 
quate inquiry  into  the  actual  merits  of  what  he  gets,  has  no  right 
to  treat  as  material  in  his  determination  statements  like  these.  The 
standard  of  honesty  permitted  by  the  rule  may  not  be  the  best;  but 
the  chance  that  the  higgling  preparatory  to  a  bargain  may  be  after- 
wards translated  into  assurances  of  quality  may  perhaps  be  a  set- 
off to  the  actual  wrong  allowed  by  the  rule  as  it  stands.  We  there- 
fore think  that  the  District  Court  was  right  in  disregarding  all  these 
misrepresentations. 

As  respects  the  representation  that  the  cleaners  had  never  been 
put  upon  the  market  or  offered  for  sale,  the  rule  does  not  apply; 
nor  can  we  agree  that  such  representations  could  not  have  been 
material  to  Freeman's  decision  to  accept  the  contract.  The  actual 
test  of  experience  in  their  sale  might  well  be  of  critical  conse- 
quence in  his  decision  to  buy  the  business,  and  the  jury  would  cer- 
tainly have  the  right  to  accept  his  statement  that  his  reliance  upon 
these  representations  was  determinative  of  his  final  decision.  We 
believe  that  the  facts  as  disclosed  by  the  depositions  of  the  Western 
witnesses  were  sufficient  to  carry  to  the  jury  the  question  whether 
those  statements  were  false.  It  is  quite  true,  as  the  District  Judge 
said,  that  the  number  of  sales  was  small,  perhaps  not  60  in  all ; 
but  they  were  scattered  in  various  parts  of  the  Mountain  and 
Pacific  States,  and  the  jury  might  conclude  that  they  were  enough 
to  contradict  the  detailed  statements  of  Simmons  that  the  machines 
had  been  kept  off  the  market  altogether. 

3.     Implied  Warranty  of  Title. 

Gould  V.  Bourgeois.  5/  N.  J.  L.  j6i. 

Gould  and  Downs  had  a  contract  with  Holly  Beach  City  to  build 
a  breakwater,  which  contract  they  assigned  to  Bourgeois,  taking  as 
part  consideration  Bourgeois'  note  on  which  they  now  sue.  It 
later  turned  out  that  the  city  did  not  have  the  power  under  its 
charter  to  build  the  breakwater.  Bourgeois  contends  that  Gould 
and  Downs  warranted  a  valid  contract  when  making  the  assign- 
ment. 

Held,  that  a  vendor  does  not  warrant  his  title  if  the  circum- 
stances  indicate  that  there   was   no   such   intent. 

Depue,  J. 

The  theory  on  which  a  warranty  of  title  is  implied  upon  the 
sale  of  personal  property  is,  that  the  act  of  selling  is  an  affirma- 
tion of  title.  The  earlier  English  cases  adopted  a  distinction  between 
a  sale  by  a  vendor  who  was  in  possession  and  a  sale  where  the  chat- 
tel  v,as   in  the  possession   of   a  third  person,   annexing   a   warranty 


SALES  311 

of  title  to  the  former,  and  excluding  it  in  the  latter.  In  the  cele- 
brated case  of  Paisley  v.  Freeman,  3  T.  R.  51,  Buller,  J.  repudiated 
this  distinction.  "If  an  affirmation  at  the  time  of  the  sale  be  a 
warranty,  I  cannot  feel  a  distinction  between  the  vendor's  being  in 
or  out  of  possession.  The  thing  is  bought  of  him,  and  in  consequence 
of  his  assertion,  and  if  there  be  any  difference,  it  seems  to  me  that 
the  case  is  strongest  against  the  vendor  when  he  is  out  of  possession, 
because  then  the  vendee  has  nothing  but  the  warranty  to  rely  on." 
Nevertheless,  the  English  courts  continue  to  recognize  the  distinction 
at  least  so  far  as  to  annex  the  incident  of  an  implied  warranty  of 
title  on  a  sale  by  a  vendor  in  possession.  Later  decisions  have 
placed  the  whole  subject  of  implied  warranty  of  title  on  a  more 
reasonable  basis.  The  rule  in  force  in  England  at  this  time  [is]  : 
"A  sale  of  personal  chattels  implies  an  affirmation  by  the  vendor  that 
the  chattel  is  his,  and  therefore  he  warrants  the  title,  unless  it  be 
shown  by  the  facts  and  circumstances  of  the  sale  that  the  vendor 
did  not  intend  to  assert  ownership,  but  only  to  transfer  such  interest 
as  he  might  have  in  the  chattel  sold."  In  this  country  the  distinc- 
tion between  sales  where  the  vendor  is  in  possession,  and  where  he 
is  out  of  possession,  with  respect  to  implied  warranty  of  title,  has 
been  generally  recognized,  but  the  tendency  of  later  decisions  is 
against  the  recognition  of  such  a  distinction  and  favorable  to  the 
modern  English  rule.  There  seems  no  reason  why,  in  every  case 
where  the  vendor  purports  to  sell  an  absolute  and  perfect  title,  he 
should  not  be  held  to  warrant  it. 

But  there  is  a  line  of  English  cases  holding  that  where  the 
facts  and  circumstances  show  that  the  purpose  of  the  sale,  as  it 
must  have  been  understood  by  the  parties  at  the  time,  was  not  to 
convey  an  absolute  and  indefeasible  title,  but  only  to  transfer  the 
title  or  interest  of  the  vendor,  no  warranty  of  title  will  be  implied. 
In  this  proposition,  the  fact  that  the  vendor  is  in  or  out  of  posses- 
sion is  only  a  circumstance  of  more  or  less  weight,  according  to 
the  nature  and  circumstances  of  the  particular  transaction.  Thus, 
on  a  sale  by  a  pawnbroker  at  public  auction,  of  goods  pledged  to  him 
in  the  way  of  business,  there  [is]  no  implied  warranty  of  absolute 
title,  the  undertaking  of  the  vendor  being  only  that  the  subject  of 
the  sale  was  a  pledge,  and  irredeemable  by  the  pledgor. 

Stating  the  principle  in  the  negative  form,  that  there  is  no 
undertaking  by  the  vendor  for  title  unless  there  be  an  express  war- 
ranty of  title,  or  an  equivalent  to  it  by  declaration  or  conduct,  affects 
only  the  order  of  proof.  It  was  conceded  that  the  pawnbroker  selling 
his  goods  undertook  that  they  had  been  pledged  and  were  irre- 
deemable by  the  pledgor. 

In  the  case  in  hand,  the  circumstances  connected  with  the  assign- 
ment, independent  of  the  words  "all  our  right,  title  and  interest,"  &c., 
contained  in  it,  preclude  the  implication  of  a  warranty  of  the  validity 
of  the  contract.  Taken  in  connection  with  the  words  of  the  assign- 
ment, the  intention  of  the  parties  is  free  from  doubt. 


312  COMMERCIAL    LAW    CASES 

4.     Implied  Warranties  of  Quiet  Enjoyment  and  Against  In- 
cumbrances. 

Hodges  v.  Wilkinson,    iii  N.  C.  56. 

Hodges  exchanged  a  mule  with  Wilkinson  for  a  horse.  It 
appeared  that  the  horse  was  mortgaged  to  Wahab,  who  seized  it 
while  in  the  possession  of  Hodges,  who  brings  this  suit  for  breach 
of  the  warranty  of  quiet  enjoyment  and  the  warranty  against 
incumbrances  which  he  claims  to  be  implied  in  the  transfer. 

Held,  that  in  a  contract  of  sale  there  is  a  warranty  of  quiet 
enjoyment  and  of  freedom  from  incumbrances. 

Avery,  J. 

The  warranty  of  a  title  implied  in  every  sale  of  a  chattel  has 
been  declared  by  this  court  to  be  in  effect  a  covenant  for  quiet 
enjoyment.  The  distinction  between  the  breaches  of  express  and 
implied  warranties  of  personal  property  has  not  been  generally  rec- 
ognized, though  at  least  one  court  and  text-writers  of  the  highest 
respectability  have  given  their  sanction  to  it. 

If  the  question  had  been  left  an  open  one,  however,  strong  rea- 
sons, well  supported  by  authority,  might  be  adduced  in  favor  of  the 
contention  that  covenants  of  warranty  of  the  title  to  chattels,  whether 
expressed  or  implied,  are  analogous  rather  to  the  personal  covenant 
that  the  grantor  is  seized  of  land,  has  full  right  to  convey  it,  and 
that  the  land  is  free  from  incumbrances,  than  to  the  covenants  of 
warranty  and  quiet  enjoyment,  which  run  with  the  land,  and  that  a 
breach  is  created  and  the  right  of  action  accrues  at  the  time  of  the 
sale,  if  the  title  of  the  seller  is  then  defective. 

But  it  seems  to  be  settled  that  it  is  not  an  essential  prerequisite 
to  recover  on  the  covenant  of  warranty  or  quiet  enjoyment  in  a 
deed  for  land  even  that  the  plaintiff  should  show  that  he  has  been 
actually  evicted  under  legal  process.  If  he  has  not  been  so  evicted, 
yet  if  he  show  that  he  has  yielded  the  possession  to  the  owner  by 
title  paramount,  or  that  the  lands  being  unoccupied,  such  true  owner 
has  entered  and  acquired  possession,  it  is  sufficient  evidence  of  a 
breach  of  the  warranty.  Proof  of  "the  existence  of  a  better  title 
with  an  actual  possession  in  another  under  it,"  is  equivalent  to  evi- 
dence of  an  eviction  and  the  plaintiff  will  be  relieved  of  the  burden 
of  showing  a  breach  of  the  covenant  which  he  takes  upon  himself 
in  bringing  the  action  when  he  adduces  such  proof  of  title  as  makes 
further  contention  probably  useless.  The  law  does  not  require  one  to 
do  a  vain  thing.  It  is  not  incumbent  on  him  to  make  himself  a 
trespasser  by  an  actual  entry,  nor  to  incur  the  useless  expense  and 
suffer  the  needless  delay  incident  to  bringing  a  hopeless  suit.  The 
covenant  of  warranty  is  "subject  to  the  same  construction  with  a 
covenant  for  quiet  enjoyment."  Actions  on  the  warranty  of  title 
implied    in   the   sale   of  personal   property   being   then   governed   by 


SALES  3  1 3 

the  same  rules  as  to  the  burden  of  proving  the  breach  as  those 
brought  upon  covenants  for  quiet  enjoyment  of  lands,  it  necessarily 
follows  that  it  was  sufficient  for  the  plaintiff  to  show  that  Wahab 
had  title  to  the  horse  in  controversy  by  virtue  of  the  mortgage  when 
Wilkinson  sold  to  the  former,  and  that  the  horse  had  been  seized 
and  the  possession  of  him  acquired  by  Wahab  by  virtue  of  the  war- 
ranty in  the  claim  and  delivery  proceeding  brought  against  the 
plaintiff. 

5.    Sale    by  Inspection:    Caveat  Emptor. 

Northern  Supply  Co.  v.  Wangard.    iiy  Wis.  624. 

The  Supply  Company  sold  a  carload  of  potatoes  to  V^angard, 
a  groceryman,  who  refused  to  pay  on  the  ground  that  they  were 
not  sound  when  received,  and  that  he  had  so  notified  the  Supply 
Company  upon  examining  them  a  few  days  after  their  arrival. 
The  Supply  Company  contends  that  by  receiving  the  goods,  Wan- 
gard lost  his  right  to  object  later  to  their  quality. 

Held,  that  in  a  sale  by  inspection,  the  buyer  has  a  reasonable 
time  in  which  to  make  inspection. 

Marshall,  J. 

It  is  conceded  that  the  contract  in  question  here  was  execu- 
tory in  character.  The  title  to  the  potatoes  did  not  pass  from  seller 
to  buyer  till  the  transit  thereof  ended  at  Tomahawk  and  the  prop- 
erty was  accepted  by  the  purchaser,  actually  or  constructively,  in 
satisfaction  of  the  contract.  As  to  such  a  contract  the  rule  as  first 
formulated  by  this  court  was  as  follows :  "When  the  defects  in  the 
goods  are  patent  and  obvious  to  the  senses,  when  the  purchaser  has 
a  full  opportunity  for  examination,  and  knows  of  such  defects,  he 
must,  either  when  he  receives  the  goods  or  within  what  under  the 
circumstances  is  a  reasonable  time  thereafter,  notify  the  seller  that 
the  goods  are  not  accepted  as  fulfilling  the  warranty ;  otherwise  the 
defects  will  be  deemed  waived." 

That  has  been  changed  somewhat  by  removing  the  feature  con- 
tained in  the  literal  sense  at  least  of  the  quoted  language,  that 
there  must  not  only  be  acceptance  with  full  means  of  knowledge  but 
with  actual  knowledge  of  the  defects  in  order  to  waive  the  warranty 
in  respect  thereto,  an  idea  which  was  probably  not  intended  to  be 
embodied  in  the  rule.  Now  it  is  understood  that  the  maxim  caveat 
emptor  will  apply  as  to  patent  defects  if  the  purchaser  has  full  means 
of  knowledge  thereof  by  the  exercise  of  ordinary  attention  to  his 
business,  which  requires  him  to  at  least  look  at  what  he  buys  as  it 
comes  into  his  possession,  or  when  it  is  offered  to  him,  or  within  a 
reasonable  time  thereafter,  so  as  to  observe  patent  imperfections  if 
there  are  such.  In  the  original  statement  of  the  rule  the  idea  of  the 
result  of  acceptance  with  knowledge  and  with  means  of  knowledge 


314  COMMERCIAL    LAW    CASES 

should  have  been  used  in  the  disjunctive  instead  of  the  conjunctive. 
That  is,  a  person  is  chargeable  with  knowledge  of  all  that  under 
the  circumstances  of  the  case  he  ought  to  know,  and  he  is  also 
chargeable  with  such  knowledge  as  he  in  fact  possesses,  whether  such 
possession  is  the  result  of  the  exercise  of  mere  ordinary  care  or  not. 

"If  a  person  sells  another  property  to  be  delivered,  accompanying 
the  sale  with  a  warranty,  and  when  delivery  takes  place  there  are 
defects  in  the  property  which  are  discoverable  by  a  person  of  ordinary 
intelligence  in  the  circumstances  of  the  purchaser,  by  the  exercise 
of  ordinary  care,  and  such  other  nevertheless  accepts  the  property, 
neither  objecting  thereto  then  nor  within  a  reasonable  time  thereafter, 
he  thereby  waives  the  defects  so  that  he  can  neither  rescind  the  same, 
counterclaim  for  damages  when  sued  for  the  purchase  price,  nor  sue 
for  damages  for  breach  of  warranty  after  paying  for  the  property." 

It  would  be  well  to  read  into  that  rule  after  the  word  "there- 
after,"— "nor  notifying  such  person  that  the  property  will  not  be  con- 
sidered as  in  satisfaction  of  the  contract." 

From  what  has  been  said  it  will  be  easily  seen  that  when  the 
trial  court,  in  the  quoted  instructions,  gave  the  jury  to  understand 
that  it  was  permissible  for  them  to  find  that  appellant  waived  the 
warranty  by  taking  the  potatoes  from  the  car,  even  as  to  defects 
discoverable  only  by  examining  the  internal  condition  thereof,  he 
went  altogether  too  far.  The  mere  act  of  taking  the  potatoes  from 
the  car  did  not  waive  anything,  necessarily.  It  was  proper  for 
appellant  to  receive  the  potatoes  into  his  possession  and  to  take 
what  under  the  circumstances  was  a  reasonable  time  to  observe  their 
condition,  even  as  to  matters  evidenced  by  the  external  appearance 
thereof,  and  to  notify  the  respondent  that  the  property,  or  a  portion 
of  it,  was  not  accepted  as  satisfying  the  conditions  of  the  purchase, 
without  prejudice  to  his  right  to  insist  upon  the  warranty.  The 
evidence  is  undisputed  that  within  a  very  few  days  after  the  potatoes 
were  taken  from  the  car,  and  in  the  letter  notifying  the  respondent 
of  a  return  of  the  sacks  in  which  they  were  shipped,  the  latter  was 
advised  that  appellant  would  look  to  it  to  stand  the  loss  from  the 
potatoes  not  being  such  as  he  bargained  for.  That,  obviously,  was  a 
sufficient  notification  to  respondent  that  the  potatoes,  though  received, 
were  not  accepted  as  satisfying  the  purchase  contract. 

6.     Sale  by  Inspection:    Warranty  When  Seller  is  Manufac- 
turer. 

Kellogg  Bridge  Co.  v.  Hamilton,  no  U.  S.  108. 

The  Keliogf^  Bridge  Company  was  engaged  in  building  a  bridge 
for  the  Lake  Shore  and  Michigan  Southern  Railroad  Company. 
When  the  hridge  was  partially  built,  the  Bridge  Company  con- 
tracted with  Hamilton  that  he  shotdd  begin  where  it  left  off,  and 
finisli  tlie  work.     lie  did  so,  hut  some  of  the  structures  erected  by 


SALES  3  I  5 

the  Bridge  Company  sank  under  the  weight  of  the  bridge,  and  had 
to  be  replaced  by  Hamilton.  He  contends,  in  a  suit  for  the  amount 
due,  that  there  was  a  warranty  by  the  Bridge  Company  that  these 
structures  were  suitable. 

Held,  that  when  the  seller  is  the  manufacturer,  there  is  a  war- 
ranty against  latent  defects. 

Harlan,  J. 

The  argument  in  behalf  of  plaintiff  in  error  proceeds  upon  the 
ground  that  there  was  a  simple  transfer  by  the  company  of  its  owner- 
ship of  the  work  and  materials  as  they  existed  at  the  time  of  the 
contract;  that  Hamilton  took  the  false  work  for  what  it  was  and 
just  as  it  stood;  consequently,  that  the  rule  of  caveat  emptor  applies 
with  full  force.  The  position  of  counsel  for  Hamilton  is  that,  as 
in  cases  of  sales  of  articles  by  those  manufacturing  or  making  them, 
there  was  an  implied  warranty  by  the  Bridge  Company  that  the  work 
sold  or  transferred  to  Hamilton  was  reasonably  fit  for  the  purposes 
for  which  it  was  purchased. 

"No  principle  of  the  common  law  has  been  better  established,  or 
more  often  affirmed,  both  in  this  country  and  in  England,  than  that 
in  sales  of  personal  property,  in  the  absence  of  express  warranty, 
where  the  buyer  has  an  opportunity  to  inspect  the  commodity,  and 
the  seller  is  guilty  of  no  fraud,  and  is  neither  the  manufacturer  nor 
grower  of  the  article  he  sells,  the  maxim  of  caveat  emptor  applies." 

The  authorities  indicate  with  reasonable  certainty  the  substan- 
tial grounds  upon  which  the  doctrine  of  implied  warranty  has  been 
made  to  rest.  According  to  the  principles  of  decided  cases,  and 
upon  clear  grounds  of  justice,  the  fundamental  inquiry  must  always 
be  whether,  under  the  circumstances  of  the  particular  case,  the 
buyer  had  the  right  to  rely  and  necessarily  relied  on  the  judgment 
of  the  seller  and  not  upon  his  own.  In  ordinary  sales  the  buyer  has 
an  opportunity  of  inspecting  the  article  sold;  and  the  seller  not  being 
the  maker,  and  therefore  having  no  special  or  technical  knowledge 
of  the  mode  in  which  it  was  made,  the  parties  stand  upon  grounds 
of  substantial  equality.  \i  there  be,  in  fact,  in  the  particular  case, 
any  inequality,  it  is  such  that  the  law  cannot  or  ought  not  to  attempt 
to  provide  against;  consequently,  the  buyer  in  such  cases — the  seller 
giving  no  express  warranty  and  making  no  representations  tending 
to  mislead — is  holden  to  have  purchased  entirely  on  his  own  judg- 
ment. But  when  the  seller  is  the  maker  or  manufacturer  of  the 
thing  sold,  the  fair  presumption  is  that  he  understood  the  process 
of  its  manufacture,  and  was  cognizant  of  any  latent  defect  caused 
by  such  process  and  against  which  reasonable  diligence  might  have 
guarded.  This  presumption  is  justified,  in  part,  by  the  fact  that  the 
manufacturer  or  maker  by  bis  occupation  holds  himself  out  as  com- 
petent to  make  articles  reasonably  adapted  to  the  purposes  for  which 
such  or  similar  articles  are  designed.  When,  therefore,  the  buyer 
has  no  opportunity  to  inspect  the  article,  or  when,  from  the  situation, 


3l6  COMMERCIAL    LAW    CASES 

inspection  is  impracticable  or  useless,  it  is  unreasonable  to  suppose 
that  he  bought  on  his  own  judgment,  or  that  he  did  not  rely  on  the 
judgment  of  the  seller  as  to  latent  defects  of  which  the  latter,  if  he 
used  due  care,  must  have  been  informed  during  the  process  of  manu- 
facture. If  the  buyer  relied,  and  under  the  circumstances  had  reason 
to  rely,  on  the  judgment  of  the  seller,  who  was  the  manufacturer  or 
maker  of  the  article,  the  law  implies  a  warranty  that  it  is  reasonably 
fit  for  the  use  for  which  it  was  designed,  the  seller  at  the  time  being 
informed  of  the  purpose  to  devote  it  to  that  use. 

Although  the  plaintiff  in  error  is  not  a  manufacturer  in  the 
common  acceptation  of  that  word,  it  made  or  constructed  the  false 
work  which  it  sold  to  Hamilton.  The  transaction,  if  not  technically 
a  sale,  created  between  the  parties  the  relation  of  vendor  and  vendee. 
The  business  of  the  company  was  the  construction  of  bridges.  By  its 
occupation,  apart  from  its  contract  with  the  railroad  company,  it  held 
itself  out  as  reasonably  competent  to  do  work  of  that  character. 

7.     Sale  by   Description:    Warranty   of   Conformity   to   De- 
scription. 

Nichol  V.  Godts.   10  Ex.  Rep.  (Eng.)  ipi. 

Nichol  &  Company  sold  Godts  "foreign  refined  rape  oil,  war- 
ranted only  equal  to  samples."  Some  of  the  oil  was  delivered, 
and  Godts  refused  to  take  the  rest,  on  the  ground  that  the  oil, 
though  it  corresponded  to  the  sample,  consisted  of  rape  oil  adul- 
terated with  hemp  oil.  Nichol  &  Company  sue  Godts  for  failure 
to  take  the  remainder. 

Held,  that  in  a  sale  by  description,  the  goods  must  conform  to 
that  description. 

Pollock,  C.  B. 

The  jury  [were  instructed]  that,  according  to  the  true  con- 
struction of  this  contract,  not  only  the  article  delivered  must  agree 
with  the  samples  in  quality,  which  was  the  meaning  of  the  words 
"warranted  only  equal  to  samples,"  but  also  that  the  oil  ought  to 
agree  with  the  description  of  it  in  the  contract  as  to  its  character. 
It  was  contended  that  the  expression  "warranted  only  equal  to 
samples"  excluded  every  other  description  of  warranty;  and,  pro- 
vided the  oil  delivered  was  equal  to  the  samples,  that  was  sufficient 
to  render  the  defendant  liable  to  take  it  and  pay  for  it,  although, 
in  point  of  fact,  it  did  not  answer  the  description  of  being  foreign 
refined  rape  oil.  The  effect  of  that  argument  is,  to  render  the  words 
"foreign  refined  rape  oil"  of  no  avail.  Such  a  proposition  cannot  be 
supported.  I  think  the  direction  was  perfectly  correct;  for  it  could 
not  be  contended  that,  if  it  had  turned  out  that  the  oil  was  whale 
oil,  the  contract  would  have  been  performed. 


SALES  317 

Piatt,  B. 

By  the  terms  "only  equal  to  samples"  I  miderstand  that  the  oil 
to  be  delivered  was  to  be  equal  to  the  samples  in  quality.  But  the 
defendant  did  not  refuse  to  accept  the  oil  tendered  to  him  on  the 
ground  that  it  did  not  equal  the  samples,  but  on  account  of  its 
not  being  foreign  refined  rape  oil  at  all.  And  if  that  was  so,  the 
defendant  was  not  bound  to  accept  it.  If  the  jury  had  found  that 
the  article  which  the  plaintiff  tendered  was  known  in  the  market 
under  the  name  and  description  of  foreign  refined  rape  oil,  the 
plaintiff  would  have  been  entitled  to  succeed;  but  that  question  was 
put  to  the  jury,  and  they  were  of  opinion  that  it  was  not  known 
as  such.  Then  how  could  it  be  said  that  what  the  plaintiff  tendered 
was  what  he  agreed  to  sell. 

8.     Sale  by  Description :    Warranty  of  Merchantability. 

Inter-State  Grocer  Co.  r.  Bcntlcy  Co.   214  Mass.  22"/. 

The  plaintiff,  the  Inter-State  Company,  ordered  sardines  from 
the  Bentley  Company,  and  paid  for  the  goods  without  inspecting 
them.  The  sardines  were  unsalable  and  the  plaintiff  seeks  to 
recover  the  money  so  paid. 

Held,  that  in  a  sale  by  description,  there  is  an  implied  warranty 
of    merchantability. 

Rugg,  C.  J. 

Upon  the  sale  of  goods  by  name  or  description,  in  the  absence 
of  some  other  controlling  stipulation  in  the  contract,  a  condition  is 
implied  that  the  goods  shall  be  merchantable  under  that  name. 
They  must  be  goods  knov.'n  in  the  market  and  among  those  familiar 
with  that  kind  of  trade  by  that  description,  and  of  such  quality  as 
to  have  value.  This  is  not  a  warranty  of  quality.  It  does  not  require 
any  particular  grade.  It  is  a  requirement  of  identity  between  the 
thing  which  is  described  as  the  subject  of  the  trade  and  the 
thing  proffered  in  performance  of  it.  The  buyer  is  entitled  to  re- 
ceive goods  fairly  answerable  to  the  description  contained  in  his  con- 
tract of  sale.  It  does  not  matter  whether  the  deleterious  characteristic 
is  latent  or  obvious,  provided  it  goes  to  the  extent  of  changing  the 
nature  of  the  goods,  so  that  they  have  no  value  in  the  market  under 
the  designation  contained  in  the  contract  of  sale.  This  is  a  gen- 
eral rule  applicable  alike  to  all,  whether  they  be  manufacturers  or 
dealers  or  merely  sellers.  It  was  declared  early  in  this  Commonwealth, 
and  has  been  adhered  to  consistently. 

This  being  the  governing  principle,  it  is  of  no  consequence 
whether  the  seller  is  a  manufacturer  or  not,  or  whether  the  defect 
is  hidden  or  discoverable  by  inspection.  Upon  a  sale  even  by  a 
casual  owner  of  sardines,   he   is  bound   to  deliver  something  which 


J 


iS  COMMERCIAL    LAW    CASES 


answers  that  description  in  the  trade.     If  he  does  not,  he  does  not 
perform  his  contract. 

This  rule  is  quite  apart  from  instances  where  the  sale  is  of 
specifically  defined  goods,  whether  open  to  the  inspection  of  the 
parties  or  not,  where  the  rule  of  caz'cat  emptor  governs.  It  is  dis- 
tinct also  from  a  sale  expressly  or  avowedly  to  the  knowledge  of 
both  parties  for  a  particular  purpose,  as  to  which  another  rule  pre- 
vails. All  these  rules  are  different  statements  of  the  principle  that 
the  buyer  has  a  right  to  get  that  which  he  has  bought.  They  deal 
not  with  a  warranty  of  quality  but  with  a  condition  of  the  contract. 
They  touch  the  identity  of  the  subject  with  that  tendered  in  per- 
formance of  it.  This  principle  also  is  quite  separate  from  that 
frequently  applied  in  purchases  from  manufacturers  and  sometimes 
from  dealers,  where  the  buyer  relies  upon  the  skill  or  knowledge  of 
the  seller,  and  there  arises  some  sort  of  implied  warranty  of  quality. 
If  the  goods  in  the  case  at  bar  were  not  salable  for  some  price  as 
sardines  when  they  were  delivered  to  the  plaintiff,  there  was  a  breach 
of  contract  by  the  seller. 


9.     Sale  by  Sample:   What  is  Sale  by  Sample. 

Jacobs  V.  Day.  2^  N.    Y.  S.    ■j6t,. 

Day's  firm  sold  Jacobs'  assignor  raisins  by  sample.  The  goods 
did  not  conform  to  the  sample  and  the  plaintiff  sues  for  damages. 

Held,  that  what  constitutes  a  sale  by  sample  is  a  question  of 
fact. 

Bischoff,  J. 

The  circumstance,  merely,  that  at  the  time  of  the  sale  a  sample 
was  produced,  is  not  sufficient  to  constitute  the  sale  one  "by  sample." 
To  have  that  effect  it  must  be  fairly  inferable  from  the  evidence 
that  the  parties  mutually  understood,  or  that  at  least  that  the  seller  in- 
tended the  buyer  to  understand  that  the  bulk  of  the  commodity  sold 
should  in  kind  and  quality  be  equal  to  the  sample  shown.  That  a 
portion  of  the  bulk  of  the  goods  sold  was  examined  by  the  buyer  at 
the  time  of  the  sale  is  not  conclusive  that  the  sale  was  not  "by  sample." 
Neither  is  a  sale  conclusively  one  "by  sample"  because,  at  the  time 
of  the  sale,  a  sample  was  produced,  and  it  was  inconvenient  or  im- 
practicable to  examine  the  bulk  of  the  goods  sold.  These  circum- 
stances, however,  should  be  duly  considered  in  arriving  at  a  conclusion 
that  the  sale  was  or  was  not  one  "by  sample."  The  question,  there- 
fore, is  in  every  case  one  of  the  intention  of  the  parties,  to  be  deter- 
mined from  the  evidence. 

The  production  of  a  sample,  the  assurance  of  one  of  the  defend- 
ants that  the  bulk  of  the  raisins  corresponded  to  it,  the  demand  by 
plaintiff's  assignor  to  be  permitted  to  examine  the  bulk,  and  that  such 


SALES  319 

examination  would  have  entailed  the  necessity  of  opening  upwards 
of  100  boxes,  are  facts  which,  taken  in  connection  with  the  further 
fact  that  defendants'  salesmen  refused  to  accord  plaintiff's  assignor 
an  opportunity  to  examine  more  than  one  box,  reasonably  lead  to  the 
inference  that  it  was  intended,  at  the  time  of  the  sale,  the  plaintiff's 
assignor  should  rely  on  the  sample  shown,  and  her  testimony  indicates 
that  by  force  of  circumstances  she  did  so.  The  sale  to  her  must 
therefore  be  deemed  to  have  been  one  "by  sample."  Such  a  sale  is 
upon  an  implied  condition  precedent  that  the  bulk  of  the  goods  sold 
corresponds  to  the  sample.  The  buyer  is  entitled,  after  delivery,  to 
a  reasonable  time  within  which  to  examine  the  bulk  before  acceptance 
will  be  presumed,  and  upon  breach  of  the  condition  he  may  rescind 
the  sale,  and  ofYer  to  return  the  goods. 

It  was  not  necessary  for  plaintiff  to  show  that  the  contents  of 
every  box  delivered  did  not  correspond  to  the  sample.  It  was  suffi- 
cient that  a  substantial  quantity  of  the  raisins  delivered  was  deficient 
in  that  respect  to  justify  the  rejection  by  plaintiff's  assignor  of  all, 
since  she  could  not  be  compelled  to  accept  part  delivery  in  performance 
of  the  contract  of  sale  on  defendants'  part. 

10.     Sale  by  Sample:  Warranty  of  Correspondence  to  Sample. 

Spring  v.  Slayden-Kirksey  Woolen  Mills.  106  III.  App.  579. 

A  traveling  salesman  for  the  Woolen  Mills  showed  samples  of 
trousers  to  Spring,  who  ordered  a  number  of  dozen  in  dozen  lots 
according  to  the  different  samples.  When  the  goods  were  deliv- 
ered, only  one  dozen  conformed  to  the  quality  of  the  samples. 
Spring  returned  the  remainder.  The  Woolen  Mills  bring  suit 
for  the  price. 

Held,  that  in  a  sale  by  sample,  the  goods  must  correspond  to 
the  sample  in  kind,  character  and  quality. 

U^orthington,  J. 

The  uncontradicted  testimony  of  Evans  shows  this  to  be  a  divis- 
ible, and  not  an  entire,  contract.  If  all  the  pants  purchased  had  been 
of  one  lot,  a  different  case  would  be  presented.  In  such  instance  the 
case  would  be  similar  to  [one]  where  six  cases  of  beavers  were 
bought,  by  sample.  The  court  held  this  to  be  an  entire  contract, 
and  that,  to  rescind,  all  the  cases  must  be  returned.  If  the  evidence 
liad  shown  that  the  cases  were  of  different  lots  or  qualities,  and  of 
different  prices,  the  facts  would  have  been  on  all  fours  with  the  facts 
in  this  case,  and  the  decision  would  be  pertinent. 

In  [another  case]  the  contract  was  for  eighty-one  gallons  of 
Affenthaler  red  wine.  This  was  held  to  be  an  entire  contract. 
There  was  not,  as  in  the  present  case,  different  lots  of  wine,  of 
different  qualities  and  prices.     Where  goods  are  sold  by  sample,  it 


320  COMMERCIAL    LAW    CASES 

is  a  condition  precedent  that  the  goods,  when  delivered,  shall  cor- 
respond with  the  sample  by  which  the  sale  is  made,  in  kind,  character, 
and  quality. 

"Where  a  sale  of  goods  is  effected  by  exhibiting  a  sample,  or 
where  the  purchaser  has  no  opportunity  of  inspection,  in  the  first 
instance,  the  bulk  must  be  as  good  as  the  sample,  and  in  the  latter,  it 
must  be  as  represented." 

A  sale  by  sample  is  equivalent  to  a  warranty  that  the  sample  is 
a  true  representative  of  the  goods. 

It  is  well  settled  that,  where  articles  purchased  under  a  contract 
of  warranty  are  not  of  the  kind  or  qualit}-  warranted,  the  purchaser 
may  rescind  the  contract. 

When  different  articles  are  bought  at  the  same  time,  for  different 
prices,  though  of  the  same  general  description,  the  contract  is  not 
entire,  but  is  a  separate  contract  for  each  article  sold,  unless  the  taking 
of  the  whole  was  rendered  essential,  either  by  the  nature  of  the 
subject  matter  or  by  the  act  of  the  parties. 


II.     Sale  by  Sample:    Warranty  of  Right  of  Inspection. 

Lorymcr  v.  Smith,    i  B.  &  C.  (Eiig.)  i. 

Smith  bought  wheat  of  Lorymer  according  to  samples  shown. 
Lorymer  then  refused  to  allow  Smith  to  inspect  the  wheat,  and 
Smith  elected  to  treat  this  refusal  as  a  termination  of  the  contract. 
Lorymer  sues  for  his  refusal  to  take  delivery. 

Held,  that  in  a  sale  by  sample,  the  buyer  has  a  right  to  inspect 
the  goods. 

Abbott,  C.  J. 

It  appears  that,  by  the  usage  of  the  place,  the  buyer  had  a  right 
to  inspect  the  wheat  in  bulk ;  which  is  so  reasonable  that,  without 
any  such  usage,  the  law  would  give  him  that  right.  Here,  on  the 
19th  of  September,  the  buyer  desired  to  see  the  whole  of  the  wheat 
in  bulk,  but  the  seller  refused  to  show  it ;  upon  that  refusal,  the 
request  having  been  made  at  a  proper  and  convenient  time,  the 
buyer  was  entitled  to  rescind  the  contract. 

Holroyd,  J. 

The  buyer  had  a  right  to  inspect  the  wheat  in  bulk,  in  order  to 
ascertain  whether  it  corresponded  with  the  sample,  and  might  have 
insisted  upon  having  it  delivered  immediately  upon  tendering  a 
banker's  bill  for  the  price.  The  seller  not  being  ready  to  complete 
his  part  of  the  contract  of  the  19th  of  September,  when  he  was 
requested  to  show  the  wheat,  cannot  afterwards  insist  upon  perform- 
ance by  the  buyer. 


SALES  321 

12.     Sale  by   Sample:    Warranty  Against   Defects  not   Ap- 
parent. 

Drummond  &  Sons  v.  Van  Ingen  &  Co.  12  A.  C.  (Eng.)  284. 

Van  Ingen  &  Company  ordered  worsted  cloth  by  sample,  to  be 
of  the  "quality"  of  the  sample,  from  Drummond  &  Sons,  manu- 
facturers, for  the  purpose  of  resale,  as  the  manufacturers  knew. 
It  later  appeared  that,  owing  to  a  defect  in  the  manufacture  not 
easily  apparent  on  examination,  the  cloth,  which  corresponded  in 
every  particular  with  the  sample,  did  not  possess  wearing  qualities, 
and  was  therefore  useless  for  the  purpose  of  resale.  In  a  suit  for 
the  price  brought  by  Drummond  &  Sons,  the  defendant  sets  up 
this  latent  defect  by  way  of  counter  claim. 

Held,  that  in  a  sale  by  sample,  there  is  an  implied  warranty 
against  defects  not  apparent  from  a  reasonable  examination  of 
the  sample. 

Earl  of  Selborne,  L.  C. 

It  remains  to  be  considered,  whether  this  was  a  defect  of  quality 
against  which  there  was  an  implied  warranty  by  the  appellants,  under 
all  the  circumstances  of  the  case.  That  it  was  a  defect  of  quality 
seems  to  me  indisputable ;  and,  if  it  was  known  to  the  respondents 
when  they  gave  the  order,  or  if  (as  between  themse'ives  and  the 
appellants)  they  ought  to  be  taken  as  having  discovered,  or  as  having 
had  means  which  they  ought  to  have  used  of  discovering  it  from  the 
samples,  I  should  hold  that  it  was  covered  by  the  word  "quality"  as 
used  in  the  contracts,  and  that  there  was  no  implied  warranty  against 
it.  But  if  it  was  a  latent  defect,  of  which  knowledge,  or  means  of 
knowledge  which  ought  to  have  been  used,  could  not  properly,  under 
the  circumstances,  be  imputed  to  the  respondents,  then  I  think  that 
the  word  "quality,"  as  used  in  the  contracts,  ought  to  be  restricted 
to  those  qualities  which  were  patent,  or  discoverable  from  such  exam- 
ination and  inspection  of  the  samples  as,  under  the  circumstances, 
the  respondents  might  reasonably  be  expected  to  make ;  and  that  it 
cannot  be  extended  to  defects  in  the  texture  of  the  samples,  rendering 
the  cloth  so  manufactured  unmerchantable  for  the  purposes  for  which 
the  order  was  given,  of  which  such  examination  and  inspection  would 
give  the  merchants,  practically,  no  notice. 

I  do  not  think  it  necessary  to  go  into  any  of  the  cases  which 
have  been  decided  upon  questions  of  this  kind ;  I  think  it  sufficient  to 
say  that,  while  the  doctrine  of  implied  warranty  ought  not  to  be 
unreasonably  extended,  so  as  to  require  manufacturers  to  be  con- 
versant with  all  the  specialties  of  all  trades  and  businesses  which 
they  do  not  carry  on,  but  for  the  purposes  of  which  goods  may  be 
ordered  from  them,  yet  I  think  it  does  extend  to  such  a  case  as  the 
present,  if  the  goods,  being  of  a  class  known  and  understood  between 


322  COMMERCIAL    LAW    CASES 

merchant  and  manufacturer  as  in  demand  for  a  particular  trade  or 
business,  and  being  ordered  with  a  view  to  that  market,  are  found 
to  have  in  them,  when  supplied,  a  defect  practically  new,  not  disclosed 
by  the  samples,  but  depending  on  the  method  of  manufacture,  which 
renders  them  unfit  for  the  market  for  which  they  were  intended. 
If  it  would  be  unreasonable,  on  the  one  hand,  to  expect  from  the 
manufacturer  a  more  exact  knowledge  than  in  the  ordinary  course 
of  business  would  be  likely  to  reach  him  of  the  processes  and  modes 
of  treatment  through  which  manufactured  goods  may  pass,  in  the 
hands  of  the  merchant  or  his  customers,  before  being  adapted  to  their 
ultimate  uses,  it  would  be  not  less  unreasonable  to  expect  from  the 
merchant  an  exact  knowledge,  not  only  of  the  sort  of  article  which 
he  wants,  but  also  of  the  processes  by  which  it  is  to  be  manufactured. 
He  has  a  right  to  presume  that  the  manufacturer  understands  his 
own  business,  and  will  use  such  methods  as  may  be  proper  to  produce 
a  good  article  of  the  kind  ordered.  The  burden  of  ascertaining 
beforehand  that  this  can  be  done,  or  how  it  is  to  be  done,  does  not 
rest  upon  him. 

13.     Warranty  of  Fitness  for  Particular  Purpose. 

Jones  V.  Padgett.   L.  R.  24  O.  B.  D.  (Eng.)  6^0. 

Jones  carried  on  the  business  of  woolen  merchant  at  one  ad- 
dress and  of  tailor  at  another.  He  ordered  "indigo  blue  cloth" 
to  be  made  according  to  sample  by  the  defendants,  who  were 
woolen  manufacturers,  intending,  although  this  was  not  known 
to  the  defendants,  to  use  the  cloth  in  his  business  as  a  tailor  for 
the  making  of  liveries.  The  cloth  was  unstiitable  for  this  purpose, 
though  that  could  not  be  determined  from  a  reasonable  examina- 
tion of  the  sample.  Jones  sues  for  breach  of  an  implied  warranty 
that  the  cloth  should  be  fit  for  the  making  of  liveries. 

Held,  that  there  is  no  implied  warranty  of  fitness  for  any  par- 
ticular purpose  unless  the  buyer  makes  known  his  needs  to  the 
seller. 

Lord  Coleridge,  C.  J. 

There  is  no  doubt  that  if  a  manufacturer  sells  an  article  which 
he  knows  is  bought  for  a  particular  jjurpose,  he  impliedly  warrants 
that  it  is  fit  for  that  particular  purpose.  But  the  present  case  is  not 
within  that  rule,  because  nothing  was  mentioned  to  the  seller  as  to 
the  particular  purpose  for  which  this  cloth  was  bought,  and  there 
was  nothing  to  fix  him  with  knowledge  of  that  purpose.  Here,  all 
that  was  shown  was  that  the  seller  on  the  one  side  was  a  manufacturer, 
and  the  buyer  on  the  other  side  was  a  woolen  merchant.  No  doubt 
it  was  possible  that  the  buyer  might  sell  the  goods  to  some  person 
or  other  who  might  use  them  for  a  purpose  for  which  they  were  not 


SALES 


30  -y 


fit,  and  I  may  assume  that  the  goods  here  were  unfit  for  the  particular 
purpose  to  which  the  plaintiiT  apphed  them.  But  there  was  nothin<j' 
beyond  the  position  of  the  parties  to  show  that  the  seller  knew  the 
specific  purpose  for  which  they  were  bought,  and  it  could  not  be 
denied  that  they  might  have  been  used  for  a  variety  of  other  purposes 
for  which  they  were  fitted.  The  plaintiff  might  have  sold  them  to 
be  used  for  purposes  for  which  they  were  applicable.  If  the  plaintiff 
is  to  succeed,  it  must  be  on  the  ground  of  the  reasonableness  of 
imputing  such  knowledge  to  the  manufacturer.  I  do  not  see  that  there 
was  any  evidence  that  the  n.aking  of  liveries  was  the  only  purpose, 
or  even  the  most  usual  purpose,  for  which  this  particular  kind  of 
cloth  was  ordinarily  used,  and  unless  that  is  so  there  is  nothing  to 
fix  the  manufacturer  with  knowledge  which  would  bring  the  case 
within  the  rule. 

14.     Warranty  of  Fitness:   Reason  for  the  Rule. 

Randall  v.  Nczvson.   L.  R.  2  O.  B.  D.  (Eng.)  102. 

Randall  bought  of  Newson  a  carriage  to  which  a  new  pole  was 
fitted  at  Randall's  special  order.  The  pole  broke  and  injured 
Randall's  horses.  Randall  sues  on  an  implied  warranty  that  the 
pole  was  fit  for  a  carriage  pole. 

Held,  that  when  goods  are  bought  for  a  special  purpose,  known 
to  the  vendor,  there  is  an  implied  warranty  that  they  are  fit  for 
that  purpose. 

Brett,  J.  A. 

In  some  contracts  the  undertaking  of  the  seller  is  said  to  be  only 
that  the  article  shall  be  merchantable ;  in  others,  that  it  shall  be 
reasonably  fit  for  the  purpose  to  which  it  is  to  be  applied.  In  all,  it 
seems  to  us,  it  is  either  assumed  or  expressly  stated  that  the  funda- 
mental undertaking  is  that  the  article  oft'ered  or  delivered  shall  answer 
the  description  of  it  contained  in  the  contract.  That  rule  comprises 
all  the  others;  they  are  adaptations  of  it  to  particular  kinds  of  con- 
tracts of  purchase  and  sale.  You  must,  therefore,  first  determine 
from  the  words  used,  or  the  circumstances,  what,  in  or  according  to 
the  contract,  is  the  real  mercantile  or  business  description  of  the 
thing  which  is  the  subject  matter  of  the  bargain  of  purchase  or  sale, 
or,  in  other  words,  the  contract.  If  that  subject  matter  be  merely 
the  commercial  article  or  commodity,  the  undertaking  is  that  the  thing 
offered  or  delivered  shall  answer  that  description ;  that  is  to  say,  shall 
be  that  article  or  commodity,  salable  or  merchantable.  If  the  subject 
matter  be  an  article  or  commodity  to  be  used  for  a  particular  purpose, 
the  thing  offered  or  delivered  must  answer  that  description;  that  is 
to  say,  it  must  be  that  article  or  commodity,  and  reasonably  fit  for 
tlie  particular  purpose.  The  governing  principle,  therefore,  is  that 
the  thing  offered  and  delivered  under  a  contract  of  purchase  and  sale 


324  COMMERCIAL    LAW    CASES 

must  answer  the  description  of  it  which  is  contained  in  words  in  the 
contract,  or  which  would  be  so  contained  if  the  contract  were  accu- 
rately drawn  out. 

15.     Warranties  Annexed  by  Usage. 

Barnard  v.  Kellogg.  10  Wall,   (U.  S.)  ^8^. 

Barnard  placed  a  lot  of  wool  in  the  hands  of  brokers  to  sell, 
with  instructions  not  to  sell  unless  the  purchaser  examined  the 
wool.  Kellogg,  having  seen  several  samples  of  the  wool,  stated 
that  his  firm  would  take  the  wool  if  it  conformed  to  sample. 
The  brokers  refused  to  sell  by  sample  and  Kellogg  examined  the 
Avool  as  fully  as  he  desired.  After  delivery  it  was  found  that 
much  of  this  wool  was  fraudulently  packed,  though  without  the 
knowledge  of  Barnard.  Kellogg  &  Company  sue  to  recover  dam- 
ages on  an  implied  warranty  against  fraudulent  packing,  which 
they  contend  exists  by  custom  among  wool  brokers. 

Held,  that  custom  will  not  create  a  warranty  inconsistent  with 
the  terms  of  the  contract. 

Davis,  J. 

It  is  to  be  regretted  that  the  decisions  of  the  courts,  defining 
what  local  usages  may  or  may  not  do,  have  not  been  uniform.  In 
some  judicial  tribunals  there  has  been  a  disposition  to  narrow  the 
limits  of  this  species  of  evidence,  in  others  to  extend  them,  and  on 
this  account  mainly  the  conflict  in  decision  arises.  But  if  it  is  hard 
to  reconcile  all  the  cases,  it  may  be  safely  said  they  do  not  differ 
so  much  in  principle  as  in  the  application  of  the  rules  of  law.  The 
proper  ofifice  of  a  custom  or  usage  in  trade  is  to  ascertain  and  explain 
the  meaning  and  intention  of  the  parties  to  a  contract,  whether 
written  or  in  parol,  which  could  not  be  done  without  the  aid  of  this 
extrinsic  evidence.  It  does  not  go  beyond  this,  and  is  used  as  a  mode 
of  interpretation  on  the  theory  that  the  parties  knew  of  its  existence, 
and  contracted  with  reference  to  it.  It  is  often  employed  to  explain 
words  or  phrases  in  a  contract  of  doubtful  signification,  or  which 
may  be  understood  in  different  senses,  according  to  the  subject  matter 
to  which  they  are  applied.  But  if  it  be  inconsistent  with  the  contract, 
or  expressly  or  by  necessary  implication  contradicts  it,  it  cannot  be 
received  in  evidence  to  affect  it.  Usage  "may  be  admissible  to  explain 
what  is  doubtful;  it  is  never  admissible  to  contradict  what  is  plain." 
And  it  is  well  settled  that  usage  cannot  be  allowed  to  subvert  the 
settled  rules  of  law.  Whatever  tends  to  unsettle  the  law,  and  make 
it  different  in  the  different  communities  into  which  the  state  is  divided, 
leads  to  mischievous  consequences,  embarrasses  trade,  and  is  against 
public  fjolicy.  If,  therefore,  on  a  given  state  of  facts,  the  rights  and 
liabilities  of  the  parties  to  a  contract  are  fixed  by  the  general  principles 
of  the  common  law,  they  cannot  be  changed  by  any  local  custom  of 


SALES  325 

the  place  where  the  contract  was  made.  In  this  case  the  common 
law  did  not,  on  the  admitted  facts,  imply  a  warranty  of  the  good 
quality  of  the  wool,  and  no  custom  in  the  sale  of  this  article  can  be 
admitted  to  imply  one.  A  contrary  doctrine  "would  be  extremely 
pernicious  in  its  consequences,  and  render  vague  and  uncertain  all 
the  rules  of  law  on  the  sales  of  chattels." 

III. 

TRANSFER  OF  PROPERTY  BETWEEN 
BUYER  AND  SELLER. 

Property  in  goods  cannot  pass  until  the  goods  are  ascertained. 
Consequently  it  becomes  of  importance  to  determine  what  are 
ascertained  goods.  The  question  is  one  of  fact  rather  than  of 
law,  and  must  depend  upon  the  particular  circumstances  of  the 
case.  Whatever  establishes  the  exact  identity  of  the  goods  suffices 
to  make  them  ascertained. 

When  there  is  a  contract  to  sell  such  goods,  title  to  them  is 
transferred  at  such  time  as  the  parties  to  the  contract  intend  that 
it  shall  be  transferred.  For  the  purpose  of  determining  the  inten- 
tion of  the  parties,  regard  should  be  had  to  the  terms  of  the 
contract,  the  conduct  of  the  parties,  usages  of  trade,  and  the 
circumstances  of  the  case.  The  Sales  Act  contains  rules  (quoted 
D.  I.  infra)  to  assist  in  ascertaining  the  intention  of  the  parties. 

There  may  be  a  contract  to  sell,  or  a  sale  of,  an  undivided 
share  of  goods.  If  the  parties  intend  to  effect  a  present  sale,  the 
buyer,  because  of  the  agreement,  becomes  an  owner  in  common 
with  the  owners  of  the  other  shares.  There  is  a  conflict  between 
the  laws  of  different  states  in  event  of  the  sale  of  a  part  of  goods 
in  a  mass  of  such  goods.  In  some  jurisdictions,  selection  from 
the  mass  must  be  made  before  title  can  pass.  Other  jurisdictions 
hold  that  a  sale  of  a  quantity  fixed  by  weight,  measure,  or  count, 
is  made  when  the  intention  so  to  do  is  manifest.  In  all  jurisdic- 
tions delivery  of  the  entire  mass  to  the  buyer  with  the  power  to 
make  his  own  selection  is  evidence  of  the  intention  to  pass  the 
property.  Under  the  statute,  in  the  case  of  fungible  goods,  i.  e., 
goods  any  unit  of  which  is  treated  as  the  equivalent  of  any  other 
unit  because  of  its  nature  or  mercanti!e  usage,  there  may  be  a 
sale  of  an  undivided  share  of  a  specific  mass,  or  of  a  definite 
number,  weight,  or  measure  of  the  goods  in  the  mass.  By  such 
a  sale  the  buyer  becomes  an  owner  in  common  with  other  owners, 
and  if  the  entire  mass  is  not  as  much  as  the  quantity  sold  to  him, 
he  takes  title  to  the  entire  mass. 

In  the  absence  of  an  agreement  to  the  contrary,  goods  remain 
at  the  seller's  risk  until  the  property  is  transferred  to  the  buyer. 


2,2b  COMMERCIAL   LAW    CASES 

but  thereafter  they  are  at  the  buyer's  risk  whether  dehvery  has 
been  made  or  not.  This  rule  is  subject  to  the  following  excep- 
tions : 

1.  When  delivery  has  been  made  and  title  retained  by  the 
seller  merely  to  secure  payment,  goods  are  at  the 
buyer's  risk  from  the  time  of  delivery. 

2.  When  delivery  has  been  delayed  through  the  fault  of 
the  buyer  or  seller,  the  goods  are  at  the  risk  of  the 
party  in  fault  to  the  extent  of  any  loss  occasioned  by 
such  fault. 

As  a  rule,  no  person  can  sell  personal  property  so  as  to  convey 
a  vahd  title  unless  he  is  the  owner  thereof.  The  buyer  secures 
no  better  title  to  goods  than  the  seller  had,  unless  the  owner  of 
the  goods  is,  by  his  conduct,  precluded  from  denying  the  seller's 
authority  to  sell.  When  the  seller  has  a  voidable  title  to  goods 
but  his  title  has  not  been  avoided  at  the  time  of  the  sale,  the  buyer 
acquires  a  good  title  if  he  buys  in  good  faith,  for  value,  and  with- 
out notice  of  the  seller's  defect  of  title.  Under  the  Sales  Act, 
when  a  person  has  sold  goods  and  continues  in  possession  of  them 
or  of  a  negotiable  document  of  title  to  them,  and  delivers  the 
goods,  or  transfers  such  a  document,  to  any  person  for  value,  the 
transfer  has  the  same  effect  as  if  it  were  authorized.  The  true 
owner  of  the  goods  really  makes  the  person  in  possession  his  agent 
by  allowing  him  to  continue  in  possession ;  hence,  any  transfer 
made  by  him  is  under  an  ostensible  authority  to  do  so.  This  idea 
goes  farther  than  the  common  law,  which  required  an  element  of 
estoppel  in  addition  to  mere  retention  of  possession.  When  a 
seller  retains  goods  in  order  to  defraud  his  creditors  or  for  any 
other  fraudulent  purpose,  any  creditor  of  the  seller  may  treat  the 
sale  as  void. 

Any  person  to  whom  a  negotiable  document  of  title  is  nego- 
tiated, acquires  the  title  of  the  person  negotiating  the  document, 
and  the  rights  of  a  purchaser  in  good  faith  from  the  person  to 
whom  the  instrument  was  originally  made  out.  In  the  case  of  a 
non-negotiable  document  of  title,  the  person  who  receives  the  docu- 
ment secures  only  such  title  as  his  assignor  had,  and  rights  of 
third  persons  against  this  assignor  may  be  enforced  against  him, 

A.     When  Title  Passes. 

1.    Intent  the  Determining  Factor. 

Liiujhom  v.  Ecjcjlcston.   2y  Mich.  ^34. 

Eggleston  owned  lumber  in  a  mill-yard,  the  amount  of  which 
was  not  exactly  determined.     Upon  payment  of  $500  on  account, 


SALES  327 

he  sold  all  the  lumber  to  Lingham  and  Osborne  at  a  certain  price 
per  thousand,  leaving  the  exact  amount  to  be  determined  later. 
The  lumber  was  destroyed  by  fire  and  Eggleston  sues  to  recover 
the  balance. 

Held,  that  title  to  property  passes  vi^hen  the  parties  intend  it 
shall  pass ;  but  if  something  remains  to  be  done  by  the  vendor 
before  delivery,  intent  that  title  pass  immediately  is  not  usually 
to  be  inferred. 

Cooley,  J. 

Where  no  question  arises  under  the  statute  of  frauds,  and  the 
rights  of  creditors  do  not  intervene,  the  question  whether  a  sale  is 
completed  or  only  executory  must  usually  be  determined  upon  the 
intent  of  the  parties,  to  be  ascertained  from  their  contract,  the  situation 
of  the  thing  sold,  and  the  circumstances  surrounding  the  sale.  The 
parties  may  settle  this  by  the  express  words  of  their  contract,  but  if 
they  fail  to  do  so,  we  must  determine  from  their  acts  whether  the  sale 
is  complete.  If  the  goods  sold  are  sufficiently  designated  so  that  no 
question  can  arise  as  to  the  thing  intended,  it  is  not  absolutely 
essential  that  there  should  be  a  delivery,  or  that  the  goods  should 
be  in  deliverable  condition,  or  that  the  quantity  or  quality,  when  the 
price  depends  upon  either  or  both,  should  be  determined.  All  these 
are  circumstances  having  an  important  bearing  when  we  are  seeking 
to  arrive  at  the  intention  of  the  parties,  but  no  one  of  them,  nor  all 
combined,  are  conclusive. 

The  question  is  "a  question  depending  upon  the  construction  of 
the  agreement ;  for  the  law  professes  to  carry  into  effect  the  intention 
of  the  parties  as  appearing  from  the  agreement,  and  to  transfer  the 
property  when  such  is  the  intention  of  the  agreement,  not  before. 
In  this,  as  in  other  cases,  the  parties  are  apt  to  express  their  intentions 
obscurely ;  very  often  because  the  circumstances  rendering  the  point 
of  importance  are  not  present  to  their  minds,  so  that  they  really  had 
no  intention  to  express.  The  consequence  is,  that  without  absolutely 
losing  sight  of  the  fundamental  point  to  be  ascertained,  the  courts 
have  adopted  certain  rules  of  construction  which,  in  their  nature,  are 
more  or  less  technical.  Some  of  them  seem  very  well  fitted  to  aid 
the  court  in  discovering  the  intention  of  the  parties;  the  substantial 
sense  of  others  may  be  questioned.  The  parties  do  not  contemplate 
a  bargain  and  sale  till  the  specific  goods  on  which  their  contract  is 
to  attach  are  agreed  upon.  Where  the  goods  are  ascertained,  the 
parties  are  taken  to  contemplate  an  immediate  bargain  and  sale  of 
the  goods,  unless  there  be  something  to  indicate  an  intention  to  post- 
pone the  transference  of  the  property  till  the  fulfilment  of  any  con- 
ditions ;  and  when  by  the  agreement  the  seller  is  to  do  anything  to 
the  goods  for  the  purpose  of  putting  them  into  a  deliverable  shape, 
or  when  anything  is  to  be  done  to  them  to  ascertain  the  price,  it  is 
presumed  that  the  parties  mean  to  make  the  performance  of  those 


328  COMMiERCIAL    LAW    CASES 

things  a  condition  precedent  to  the  transfer  of  the  property.  But 
as  these  are  only  rules  for  the  construction  of  the  agreement,  they 
must  yield  to  anything  in  the  agreement  which  clearly  shows  a  con- 
trary intention.  The  parties  may  lawfully  agree  to  an  immediate 
transference  of  the  property  in  the  goods,  although  the  seller  is  to 
do  many  things  to  them  before  they  are  to  be  delivered;  and,  on  the 
other  hand,  they  may  agree  to  postpone  the  vesting  of  the  property 
till  after  the  fulfilment  of  any  conditions  they  please."  In  Benjamin 
on  Sales,  the  same  doctrine  is  laid  down,  and  it  is  said  that  "nothing 
prevents  the  parties  from  agreeing  that  the  property  in  a  specific 
thing  sold  and  ready  for  delivery  is  not  to  pass  till  certain  conditions 
are  accomplished,  or  that  the  property  shall  pass  in  a  thing  which 
remains  in  the  vendor's  possession,  and  is  not  ready  for  delivery, 
as  an  unfinished  ship,  or  which  has  not  yet  been  weiglied  or  measured, 
as  a  cargo  of  corn  in  bulk,  sold  at  a  certain  price  per  pound  or  per 
bushel." 

Upon  this  general  principle  there  is  no  difficulty  in  reconciling 
most  of  the  reported  decisions.  And  even  without  express  words  to 
that  effect,  a  contract  has  often  been  held  to  be  a  completed  sale, 
where  many  circumstances  were  wanting  and  many  things  [re- 
mained] to  be  done  by  one  or  both  the  parties  to  fix  conclusively  the 
sum  to  be  paid  or  to  determine  some  other  fact  material  to  their  re- 
spective rights. 

The  most  important  fact  indicative  of  an  intent  that  title  shall 
pass  is  generally  that  of  delivery.  If  the  goods  be  completely 
delivered  to  the  purchaser,  it  is  usually  very  strong  if  not  conclusive 
evidence  of  intent  that  the  property  shall  vest  in  him  and  be  at  his 
risk,  notwithstanding  weighing,  measuring,  inspection,  or  some  other 
act  is  to  be  done  afterwards.  A  striking  case  in  illustration  is  [one] 
where  a  large  quantity  of  bricks  was  purchased  in  kilns.  Only  a  part 
of  them  were  burned,  and  none  of  them  were  counted  out  from  the 
rest;  but  they  were  paid  for,  and  such  delivery  as  in  the  nature  of 
the  case  was  practicable  was  made.  The  court  held  that  the  question 
was  one  of  intention  merely,  and  that  it  was  evident  the  parties 
intended  the  title  to  pass. 

But  where  anything  is  to  be  done  by  the  vendor,  or  by  the 
mutual  concurrence  of  both  parties,  for  the  purpose  of  ascertaining 
the  price  of  the  goods,  as  by  weighing,  testing  or  measuring  them, 
when  the  price  is  to  depend  upon  the  quantity  or  quality  of  the  goods, 
the  ijcrlormancc  of  those  things  is  to  be  deemed  presumptively  a 
condition  precedent  to  the  transfer  of  the  property,  although  the 
individual  goods  be  ascertained,  and  they  are  in  the  state  in  which 
they  may  and  ought  to  be  accepted. 

[Here]  something  of  high  importance  remained  to  be  done  by 
the  vendor  to  ascertain  the  i)rice  to  be  paid;  and  as  this,  under  all 
the  authorities,  was  prcsumj)tively  a  condition  precedent  to  the  trans- 
ference of  the  title — nothing  to  the  contrary  appearing — the  court 
should  have  so  instructed  the  jury. 


SALES  329 

2.    To  What  Goods  Title  May  Pass. 

Low  V.  Pew.  108  Mass.  347. 

John  Low  &  Sons  sold  to  Alfred  Low  &  Co.  by  bill  of  sale 
on  which  $1,500  was  paid  at  the  time,  all  the  halibut  that  might  be 
caught  by  their  fishing  schooner  then  on  a  trip  to  the  Grand  Banks. 
Subsequently,  John  Low  &  Sons  went  into  bankruptcy  and  their 
assignees,  the  defendants,  refuse  to  deliver  the  halibut.  Suit  is 
brought  to  establish  the  right  of  the  plaintiffs  to  the  halibut. 

Held,  that  a  present  sale  of  property  not  yet  in  existence 
cannot  be  made. 

Morton,  J. 

It  is  an  elementary  principle  of  the  law  of  sales  that  a  man  cannot 
grant  personal  property  in  which  he  has  no  interest  or  title.  To  be 
able  to  sell  property,  he  must  have  a  vested  right  in  it  at  the  time 
of  the  sale.  Thus  it  has  been  held  that  a  mortgage  of  goods  which 
the  mortgagor  does  not  own  at  the  time  the  mortgage  is  made, 
though  he  afterwards  acquires  them,  is  void.  The  same  principle 
is  applicable  to  all  sales  of  personal  property. 

It  is  equally  well  settled  that  it  is  sufficient  if  the  seller  has  a 
potential  interest  in  the  thing  sold.  But  a  mere  possibility  of  expec- 
tancy of  acquiring  property,  not  coupled  with  any  interest,  does  not 
constitute  a  potential  interest  in  it,  within  the  meaning  of  this  rule. 
The  seller  must  have  a  present  interest  in  the  property,  of  which  the 
thing  sold  is  the  product,  growth  or  increase.  Having  such  interest, 
the  right  to  the  thing  sold,  when  it  shall  come  into  existence,  is  a 
present  vested  right,  and  the  sale  of  it  is  valid.  Thus  a  man  may 
sell  the  wool  to  grow  upon  his  own  sheep,  but  not  upon  the  sheep  of 
another;  or  the  crops  to  grow  upon  his  own  land,  but  not  upon  land 
in  which  he  has  no  interest. 

The  same  principles  have  been  applied  by  this  court  to  the 
assignment  of  future  wages  or  earnings.  An  assignment  of  future 
wages,  there  being  no  contract  of  service,  [is]  invalid.  If  a  person 
is  under  a  contract  of  service,  he  may  assign  his  future  earnings 
growing  out  of  such  contract.  The  distinction  between  the  cases  is 
that  in  the  former  the  future  earnings  are  a  mere  possibility,  coupled 
with  no  interest,  while  in  the  latter  the  possibility  of  future  earnings 
is  coupled  with  an  interest,  and  the  right  to  them,  though  contingent 
and  liable  to  be  defeated,  is  a  vested  right. 

In  the  case  at  bar,  the  sellers,  at  the  time  of  the  sale,  had  no 
interest  in  the  thing  sold.  There  was  a  possibility  that  they  might 
catch  halibut;  but  it  was  a  mere  possibility  and  expectancy,  coupled 
with  no  interest.  We  are  of  opinion  that  they  had  no  actual  or 
potential  possession  of,  or  interest  in,  the  fish;  and  that  the  sale  to 
the  plaintiffs  was  void. 


330  COMMERCIAL    LAW    CASES 

3.     To  What  Goods  Title  May  Pass:    Mortgage  of  Stock  in 
Trade. 

Sawyer  v.  Long.   86  Me.  541. 

Morrison  made  a  mortgage  to  Sawyer  of  his  stock  and  fix- 
tures. The  agreement  provided  that  he  might  sell  the  stock 
provided  he  replaced  it  with  other  stock  of  like  kind,  which  should 
be  subject  to  the  mortgage.  Morrison  later  became  insolvent, 
and  Sawyer  sues  a  purchaser  from  Morrison's  assignee  to  recover 
the  goods  mortgaged,  though  he  has  not  taken  possession  of  them. 

Held,  that  a  mortgage  of  existing  goods  is  valid  and  may 
extend  to  other  goods  substituted  for  them.* 

Haskell,  J. 

As  to  the  stock.  A  chattel  mort^^age  does  not  pass  the  legal  title 
of  after-acquired  property  to  the  mortgagee,  without  some  new  act 
sufficient  to  accomplish  the  purpose,  like  a  delivery  to  and  retention 
of  the  same  by  the  mortgagee,  or  a  confirmatory  writing  properly 
recorded,  and  the  like.  The  reason  is  that,  as  the  after-acquired 
property  is  not  in  existence  to  be  conveyed  by  the  mortgage,  title  to 
it  cannot  be  transferred  in  advance,  for  "a  man  cannot  grant  or 
charge  that  which  he  hath  not."  Things  that  have  a  potential  exist- 
ence are  an  exception  to  the  rule.  Equity,  however,  creates  "a  lien 
upon  the  res  when  produced  or  acquired,  leaving  the  legal  title  still 
in  the  grantor,  who  may  by  some  act  ratify  the  grant,  as  by  delivery 
of  the  property,  and  then  the  legal  title  is  complete  in  the  vendee." 
And  without  such  confirmatory  act  equity  will  sometimes  enforce  the 
mortgage,  when  the  balancing  of  equities  shows  that  it  should  be  done. 

if  a  mortgage  of  chattels  stipulates  that  the  mortgaged  property 
may  be  put  on  sale  by  the  mortgagor,  who  is  required  to  keep  the 
security  good  by  applying  the  proceeds  to  the  purchase  of  new  articles 
of  like  kind  to  those  sold,  the  chattels  so  purchased  become  substituted 
for  those  sold  at  the  instance  and  under  authority  from  the  mortgagee, 
so  that  the  legal  title  to  them  may  be  said  to  pass  to  him  as  effectually 
as  if  he  had  himself  made  the  sale,  by  assent  of  the  mortgagor,  and 
with  his  own  hand  replenished  the  res.  The  mortgagor  by  doing  so 
simply  executes  a  power,  performs  a  trust  created  by  the  mortgage, 
and  thereby  neither  depletes  the  security  nor  defrauds  his  other 
creditors. 

'i1ie  defendant  being  a  bona  fide  purchaser,  and  no  estoppel 
arising  as  to  him,  the  plaintiff  may  recover  so  much  of  the  stock 
replevied  as  be  has  shown  a  title  to  under  the  doctrines  of  this 
opinion,  viz.,  that  in  existence  at  the  date  of  mortgage  and  that 
substituted  for  articles  sold  by  purchase  from  the  proceeds  of  sales, 
and  no  more. 

As  to  the  fixtures.     Those  articles  only  that  were  in  the  store 

•  Cf.    Low   V.   IV'w,   preceding  case,    for   minority    rule. 


SALES  331 

when  the  mortgage  was  made  passed  by  it.  The  word  fixtures,  in 
the  sense  used  by  the  parties,  means  chattels  of  a  permanent  nature 
in  contradistinction  from  those  kept  for  sale,  such  as  were  incident 
to  the  convenient  use  of  the  store. 

4.     Goods  Must  be  Ascertained  and  Appropriated  to  the  Con- 
tract. 

Allen  V.  Elmore.  121  la.  241. 

Ehnore  bought  at  auction  hay  stored  in  Allen's  barn,  which 
had  not  been  weighed  or  measured.  A  part  of  the  purchase  price 
was  paid,  but  before  any  of  the  hay  was  removed,  it  was  destroyed 
by  accidental  fire.    Allen  sues  for  the  price. 

Held,  that  by  the  majority  rule  title  passes  when  goods  are 
ascertained  and  appropriated,  even  though  they  still  remain  to  be 
measured. 

McClain,  J. 

The  only  objection  made  by  counsel  for  appellant  with  reference 
to  his  liability  is  based  on  the  fact  that  the  quantity  of  hay  had  not 
been  ascertained  at  the  time  of  its  destruction,  and  that  weighing 
was  still  necessary  to  determine  the  purchase  price  to  be  paid.  It  is 
true  that,  so  long  as  anything  remains  to  be  done  between  the  parties 
to  ascertain  and  identify  the  particular  property  which  is  to  pass, 
the  sale  is  not  complete.  But  if  the  property  has  been  identified  so 
that  the  transaction  relates  to  a  specific  and  ascertained  chattel,  then 
the  question  is  one  of  intent,  and  the  fact  that  something  remains 
to  be  done  by  the  buyer,  such  as  weighing  or  measuring,  for  the 
purpose  of  determining  the  price  to  be  paid,  does  not  prevent  the 
transaction  being  a  completed  sale,  under  which  the  title  passes  to 
the  buyer,  accompanied  with  the  risk  of  the  loss  or  destruction  of 
the  property  without  the  seller's  fault.  The  rule  supposed  to  have 
been  recognized  in  some  of  the  earlier  English  cases,  to  the  effect 
that  there  could  be  no  passing  of  title  until  the  purchase  price  had 
been  definitely  determined  by  weighing  or  measuring,  when  necessary, 
based,  as  it  was,  apparently,  on  the  idea  that  the  action  for  the  pur- 
chase price  must  be  for  a  specific  sum,  definitely  ascertained,  has  not 
been  generally  approved  by  the  courts  in  this  country,  and  it  has  been 
held  by  the  great  weight  of  authority  that  where  the  payment  of 
the  purchase  price  is  not  a  condition  to  the  passing  of  title — that  is, 
where  credit  for  the  price  is  given — the  fact  that  weighing  or 
measuring  still  remains  necessary  to  determine  the  price  will  not 
indicate  an  intention  that  the  title  shall  not  pass  until  such  acts  are 
done ;  it  being  assumed,  of  course,  for  the  purpose  of  applying  this 
rule,  that  the  specific  goods  are  definitely  ascertained  and  agreed  upon. 
And,  whatever  may  have  been  the  earlier  views  of  the  English  judges, 
that  is  now  the  rule  in  England. 


^^2  COMMERCIAL    LAW    CASES 

Even  if,  as  is  stated  in  some  cases,  the  question  is  one  of  intent, 
for  the  jury,  we  have  in  this  case  the  conclusion  of  the  trial  court, 
entitled  to  the  same  weight  as  the  verdict  of  a  jury,  that  such  was 
the  intent,  and  the  finding  is  amply  supported  by  the  evidence. 

5.     Ascertained  Goods  Sold  by  Weight,  Measure,  or  Count. 

Kimberly  v.  Patchin.  ip  N.  Y.  jjo. 

Dickinson  had  in  a  warehouse  6,249  bushels  of  wheat.  He  sold 
6,000  bushels  to  Shuttleworth  and  agreed  to  hold  that  amount  for 
him  as  bailee.  Afterwards,  Dickinson  sold  the  whole  amount  to 
the  plaintiff's  assignor.     Patchin  claims  through  Shuttleworth. 

Held,  that  there  may  be  a  sale  of  a  certain  weight,  measure, 
or  quantity  of  goods  which  will  pass  title  without  separation. 

Comstock,  J. 

It  is  a  rule  asserted  in  many  legal  authorities,  but  which  may  be 
quite  as  fitly  called  a  rule  of  reason  and  logic  as  of  law,  that  in  order 
to  constitute  an  executed  sale,  so  as  to  transfer  a  title  from  one  party 
to  another,  the  thing  sold  must  be  ascertained.  This  is  a  self-evident 
truth,  when  applied  to  those  subjects  of  property  which  are  distin- 
guishable by  their  physical  attributes  from  all  other  things,  and, 
therefore,  are  capable  of  exact  identification.  No  person  can  be  said 
to  own  a  horse  or  a  picture,  unless  he  is  able  to  identify  the  chattel 
or  specify  what  horse  or  what  picture  it  is  that  belongs  to  him.  It  is 
not  only  legally  but  logically  impossible  to  hold  property  in  such 
things,  unless  they  are  ascertained  and  distinguished  from  all  other 
things;  and  this  I  apprehend  is  the  foundation  of  the  rule  that,  on 
a  sale  of  chattels,  in  order  to  pass  the  title,  the  articles  must,  if  not 
delivered,  be  designated,  so  that  possession  can  be  taken  by  the 
purchaser  without  any  further  act  on  the  part  of  the  seller. 

But  property  can  be  acquired  and  held  in  many  things  which 
are  incapable  of  such  an  identification.  Articles  of  this  nature  are 
sold,  not  by  a  description  which  refers  to  and  distinguishes  the 
particular  thing,  but  in  quantities,  which  are  ascertained  by  weight, 
measure  or  count;  the  constituent  parts  which  make  up  the  mass 
being  undistinguishable  from  each  other  by  any  physical  difference 
in  size,  shape,  texture  or  quality.  Of  this  nature  are  wine,  oil,  wheat 
and  the  other  cereal  grains,  and  the  flour  manufactured  from  them, 
'riiese  can  be  identified  only  in  masses  or  quantities,  and  in  that  mode, 
therefore,  they  are  viewed  in  the  contracts  and  dealings  of  men. 
In  respect  to  such  things,  the  rule  above  mentioned  must  be  applied 
according  to  the  nature  of  the  subject.  In  an  executed  and  perfect 
sale  the  thing  sold,  it  is  true,  must  be  ascertained.  But  as  it  is  not 
l)OssibIe  in  reason  and  philosophy  to  identify  each  constituent  particle 
composing  a  quantity,  so  the  law  does  not  require  such  an  identifica- 
tion.    When  the  quantity  and  the  general  mass  from  which  it  is  to  be 


SALES  333 

taken  are  specified,  the  subject  of  the  contract  is  thus  ascertained,  and 
it  becomes  a  possible  result  for  the  title  to  pass,  if  the  sale  is  complete 
in  all  its  other  circumstances.  An  actual  delivery  indeed  cannot  be 
made  unless  the  whole  is  transferred  to  the  possession  of  the  pur- 
chaser, or  unless  the  particular  quantity  sold  is  separated  from  the 
residue.  But  actual  delivery  is  not  indispensable  in  any  case  in  order 
to  pass  a  title,  if  the  thing  to  be  delivered  is  ascertained,  if  the  price 
is  paid  or  a  credit  given,  and  if  nothing  further  remains  to  be  done 
in  regard  to  it. 

We  are  of  opinion,  therefore,  both  under  authority  and  clearly 
upon  the  principle  and  reason  of  the  thing,  that  the  defendant,  under 
the  sale  to  Shuttleworth,  acquired  a  perfect  title  to  the  six  thousand 
bushels  of  wheat. 

6.     Sale  of  Goods  from  a  Mass. 

Hurjf  V.  Hires.  40  N.  J.  L.  ^81. 

Hurff  bought  from  Heritage  200  bushels  of  corn  of  a  lot 
of  400  or  500  bushels  in  Heritage's  crib  house.  He  inspected  the 
corn,  approved  it,  and  paid  cash  for  it.  It  was  agreed  that  it 
should  be  left  in  the  crib  until  it  hardened,  when  it  should  be 
removed.  Hires,  a  sheriff,  attached  it  in  a  suit  of  a  third  party 
against  Heritage,  after  which  Heritage  delivered  200  bushels  to 
Hurff.  The  sheriff  seeks  to  recover  from  Hurff  the  value  of 
this  corn. 

Held,  that  by  the  New  Jersey  rule  title  may  pass  to  a  portion 
of  goods  if  the  sale  is  from  a  larger  bulk,  uniform  in  kind  and 
quality,  even  if  there  is  no  separation. 

Depue,  J. 

The  tendency  of  the  modern  decisions  is  to  give  effect  to  contracts 
of  sale  according  to  the  intention  of  the  parties,  to  a  greater  extent 
than  is  found  in  the  older  cases,  and  to  ingraft  upon  the  rule  that 
the  property  passes  by  the  contract  of  sale,  if  such  be  the  intention, 
fewer  exceptions,  and  those  only  which  are  founded  on  substantial 
considerations  affecting  the  interests  of  parties.  At  one  time  it  was 
held  that,  under  an  agreement  to  purchase  an  entire  bulk  at  a  specified 
price,  the  property  did  not  pass  if  the  whole  amount  of  the  purchase 
money  depended  upon  an  ascertainment  by  weight  or  measurement 
subsequently  to  be  made. 

That  the  parties  contemplated  the  corn  should  be  measured  before 
it  left  the  vendor's  possession  will  not,  of  itself,  prevent  the  property 
passing.  Nor  will  the  fact  that  the  vendor  was  required  to  deliver 
it  when  the  time  for  delivery  arrived,  accomplish  that  result.  Where 
the  goods  sold  have  been  selected  and  designated,  and  the  price  paid, 
the  property  will  pass  by  the  contract  of  sale,  though  it  was  one  of 
the  terms  of  the  contract  that  the  vendor  should  transport  them  to 


334  COMMERCIAL    LAW    CASES 

a  place  named  for  delivery.  The  case,  therefore,  must  stand  exclu- 
sively on  the  fact  that  no  separation  of  the  quantity  sold  had  been 
made  from  the  entire  bulk  before  the  execution  was  levied,  and  the 
question  is  whether  there  is  a  rule  of  law  requiring,  under  the  cir- 
cumstances of  this  case,  a  separation  of  the  quantity  sold  from  the 
larger  bulk,  before  title  will  pass  to  the  purchaser,  so  positive  in  its 
sanction  as  to  overrule  the  intention  of  the  parties. 

It  is  undoubtedly  the  doctrine  of  the  English  courts  that,  "where 
there  is  bargain  for  a  certain  quantity  ex  a  greater  quantity,  and  there 
is  a  power  of  selection  in  the  vendor  to  deliver  which  he  thinks  fit, 
there  the  right  to  them  does  not  pass  to  the  vendee  until  the  vendor 
has  made  his  selection."  This  doctrine  is  founded  on  correct  prin- 
ciples, where  the  gross  bulk  is  variable  in  kind  or  quality,  and  the 
selection  from  it  of  that  part  which  shall  be  delivered  is  of  benefit 
to  the  vendor.  It  has  been  applied  to  a  sale  of  a  specified  quantity, 
from  a  larger  bulk  of  uniform  kind  and  value,  where  the  purchaser 
had  seen  the  goods  in  bulk  and  approved  of  it. 

In  my  judgment,  this  principle  should  not  be  applied  where  the 
bulk,  from  which  the  quantity  purchased  is  to  be  separated,  is  uniform 
in  kind  and  quality,  and  has  been  approved  by  the  purchaser,  and 
the  full  contract  price  has  been  paid.  There  is  a  clear  and  well 
settled  legal  distinction  between  the  individual  rights  of  several  parties 
in  goods  of  uniform  kind  and  quality,  and  in  those  in  which  there  is 
no  uniformity  in  these  respects.  It  is  recognized  in  cases  of  a  co- 
tenancy of  personal  property,  readily  divisible  by  weight  or  measure- 
ment, into  portions  absolutely  alike  in  quality  and  value.  In  such 
cases,  either  tenant  may  take  his  proper  proportion,  and  it  will  be 
regarded  as  a  proper  severance,  so  long  as  he  does  not  take  more 
than  his  share ;  but  the  rule  is  otherwise  in  case  of  property  not 
severable  in  this  manner;  in  that  event,  the  partition  must  be  by 
agreement,  or  proceedings  in  equity. 

While  the  English  courts  adhere  to  the  rule  that,  as  between 
vendor  and  purchaser,  separation  of  the  quantity  sold  from  a  larger 
bulk,  identical  in  kind  and  quality,  is  necessary  before  the  title  will 
pass,  [a]  slight  and  unimportant  circumstance  will  take  the  transaction 
out  of  the  operation  of  the  rule. 

In  the  American  courts  the  cases  on  this  subject  are  quite  con- 
flicting. 

In  Virginia,  New  York,  Connecticut  and  Maine,  the  courts  have 
held  the  broad  doctrine,  without  qualification,  that  on  a  contract  of 
sale  of  a  certain  quantity  from  a  larger  bulk,  uniform  in  kind  and 
quality,  the  property  will  pass,  though  there  be  no  separation  of  the 
quantity  sold,  if  such  be  the  intention  of  the  parties,  and  that  no  rule 
of  law  will  overrule  such  intention  if  it  be  otherwise  clearly  expressed. 

The  doctrine  held  in  these  cases,  it  seems  to  me,  is  founded  on 
good  sense  and  correct  legal  principles.  The  rule  that  the  property 
in  goods  will  pass  by  the  contract  of  sale,  if  such  be  the  intention 
of  the  parties,  is  of  the  utmost  iniijortance  ."n  the  transaction  of  the 
business  of  the  country,  and  it  ought  not  to  be  ciualified  by  exceptions 


SALES  335 

and  restrictions  which  do  not  arise  from  the  substantial  interests  of 
the  parties. 

In  this  case  the  sale,  in  all  material  respects,  was  complete.  The 
corn  had  been  inspected  and  approved,  and  the  price  agreed  on  and 
paid.  All  these  things  had  been  done  before  the  levy  of  the  execution. 
The  property  had  been  left  with  the  vendor  for  the  purchaser's 
convenience.  Nothing  was  left  undone  but  measuring  out  the  desig- 
nated quantity  from  a  bulk  identical  in  kind  and  value,  and  a  delivery 
to  the  vendee.  That  was  done  after  the  levy,  and  before  suit 
brought;  and  there  is  no  pretence  that  it  was  unfairly  done. 

7.     Minority  Requirement  of  Physical  Separation. 

Scudder  v.  IVorster.    11  Ciish.  (Mass.)  57J. 

Worster  and  Hart  contracted  to  sell  to  Secomb  and  Taylor 
250  barrels  of  pork.  A  bill  of  sale  of  the  pork  was  made  out 
and  notes  were  given  in  payment  under  an  agreement  that  the 
pork  should  remain  in  Worster  and  Hart's  cellar  at  the  risk  of 
the  vendees.  Secomb  and  Taylor  sold  100  barrels  of  the  pork  to 
Lang,  who  received  delivery  from  the  defendants.  Later  Secomb 
and  Taylor  sold  Scudder  the  other  150  barrels,  giving  an  order 
on  the  defendants,  who  assented  to  it.  Shortly  afterwards, 
Secomb  and  Taylor  became  insolvent.  Worster  and  Hart  refused 
to  deliver  the  pork  to  Scudder,  who  now  seeks  to  take  it.  The 
pork  at  all  times  had  been  part  of  a  larger  quantity  of  uniform 
quality  and  marking  in  the  defendants'  cellar. 

Held,  that  according  to  the  Massachusetts  rule,  a  sale  of  goods 
in  bulk  will  not  operate  to  transfer  property  until  the  goods  are 
separated  from  other  goods  of  the  same  sort. 

Dewey,  J. 

Had  these  250  barrels  of  pork  been  a  separate  parcel,  or  had 
the  parties  designated  them  by  any  visible  mark,  distinguishing  them 
from  the  residue  of  the  vendors'  stock  of  pork,  the  sale  would  clearly 
have  been  an  absolute  one,  and  the  property  would  at  once  have 
passed  to  the  purchaser.  There  was  nothing  required  to  have  been 
done  but  this  separation  from  the  general  mass  of  like  kind,  to  have 
placed  the  sale  beyond  all  question  or  doubt  as  to  its  validity. 

What  was  done  in  this  case  would  have  transferred  the  property 
in  the  pork,  if  the  sale  had  been  of  all  the  pork  in  the  cellar,  or  of 
any  entire  parcel  separated  from  the  residue,  or  if  the  250  barrels 
had  some  descriptive  mark  distinguishing  them  from  the  other  barrels 
not  sold.  The  difficulty  in  the  case  is  in  maintaining  that  in  the 
absence  of  each  and  all  these  circumstances  distinguishing  the  articles 
sold,  the  particular  barrels  of  pork  selected  by  the  officer  from  the 
larger  mass  when  he  served  this  process  were  the  property  of  the 
plaintiff,  or  had  ever  passed  to  him.     In  addition,  however,  to  the 


33^ 


COMMERCIAL    LAW    CASES 


numerous  cases  cited  to  establish  the  general  principles  contended  for 
on  the  part  of  the  plaintiff,  and  which  would  have  been  decisive, 
if  it  had  been  a  sale  of  all  the  pork  in  the  cellar,  or  a  particular 
parcel,  or  certain  barrels  having  descriptive  marks  which  would 
enable  the  vendee  to  separate  his  own  from  the  residue,  were  cited 
several  more  immediately  bearing  upon  the  present  case,  and  where 
property  not  separable  has  been  held  to  pass  to  the  vendee. 

"Until  the  parties  are  agreed  as  to  the  specific  identical  goods, 
the  contract  can  be  no  more  than  j,  contract  to  supply  gooc's,  answering 
a  particular  description,  and  since  the  vendor  would  fulfill  his  part 
of  the  contract  by  furnishing  any  parcel  of  goods  answering  that 
description,  it  is  clear  there  can  be  no  intention  to  transfer  the  property 
in  any  particular  lot  of  goods  more  than  another,  until  it  is  ascertained 
which  are  the  very  goods  sold." 

Examining  the  facts  in  the  case  before  us,  and  applying  the 
principles  and  the  approved  elementary  doctrine  as  to  what  is  neces- 
sary to  constitute  a  sale  of  property  not  separated  from  the  mass 
of  like  kind,  or  designated  by  any  descriptive  marks,  the  court  are 
clearly  of  opinion  that  the  property  in  the  specified  150  barrels  of 
pork  taken  by  the  plaintiff,  under  his  writ  of  replevin,  had  never 
passed  from  the  vendors,  and  therefore  this  action  cannot  be  main- 
tained. 

It  was  also  urged  that  the  defendants  were  estopped  to  deny  that 
the  150  barrels  of  pork  were  the  property  of  the  plaintiff,  having 
given  a  bill  of  sale  of  the  same,  and  under  the  circumstances  stated 
in  the  statement  of  facts.  Had  this  been  an  action  to  recover  damages 
for  the  value  of  150  barrels  of  pork,  this  position  might  be  tenable, 
and  the  defendants  estopped  to  deny  the  property  of  the  plaintiff  in 
such  150  barrels.  This  would  be  so  if  an  action  had  been  brought 
against  the  defendants  as  bailees  of  150  barrels  of  pork,  and  for  not 
delivering  the  same. 

But  the  distinction  between  the  case  of  an  action  for  damages 
for  not  delivering  150  barrels,  and  that  of  replevin,  commanding  the 
officer  to  take  from  the  possession  of  the  defendants  150  barrels,  and 
deliver  the  same  to  the  plaintiff  as  his  property,  is  an  obvious  one. 
To  sustain  the  former,  it  is  only  necessary  to  show  a  right  to  150 
barrels  generally,  and  not  any  specific  150  barrels;  but  to  maintain 
replevin,  the  plaintiff  must  be  the  owner  of  some  specific  150  barrels. 
If  bought,  they  must  be  si)ecifically  set  apart,  or  designated  in  some 
way  as  his,  and  not  intermingled  with  a  larger  mass  of  like  kind 
owned  by  the  vendor. 

8.     Selection  by  Buyer  from  Mass. 

Weld  V.  Cutler.  2  Gray  (Mass.)   195. 

Gooch,  in  return  for  Weld's  indorsement  of  a  promissory  note, 
gave  Weld  a  mortgage  on  part  of  a  pile  of  coal  lying  on  a  wharf 
belonging  to  (looch.     Later,  Weld  went  to  the  pile  and  declared 


SALES  337 

that  he  took  possession  and  gave  statutory  notice  of  foreclosure. 
Upon  Gooch  becoming  insolvent,  Weld  requested  him  to  sell  the 
coal  for  him.  This  he  did  not  do,  and  Weld  seeks  to  recover  the 
coal  from  the  defendant,  the  assignee  of  Gooch. 

Held,  that  when  a  vendee  takes  possession  of  an  entire  mass 
for  the  purpose  of  selecting  his  portion  out  of  it,  title  passes  with- 
out separation. 

Bigelow,  J. 

The  recent  case  of  Scudder  v.  Worster,  ii  Cush.  573,  settles  the 
rule  of*law  in  this  commonwealth  to  be,  that  when  there  is  a  contract 
for  the  sale  of  goods,  being  part  of  a  larger  bulk  in  the  possession 
of  the  vendor,  no  property  passes  to  the  vendee,  unless  the  portion 
comprised  in  the  contract  of  sale  is  separated  from  the  mass,  or  is 
identified  by  some  mark  or  designation  which  distinguishes  it  from 
the  residue.  The  case  at  bar  would  very  clearly  come  within  this 
rule,  if  the  mortgagor  had  remained  in  possession  of  the  coal  upon 
his  wharf,  up  to  the  time  of  his  application  for  the  benefit  of  the 
insolvent  laws.  But  the  case  finds  that  the  mortgagee,  with  the 
assent  of  the  mortgagor,  had  previously  taken  possession  of  the  entire 
lot  of  coal  on  the  wharf,  and  had  proceeded  to  sell  some  part  of  it 
in  payment  of  the  debt  secured  by  the  mortgage.  It  is  not  therefore 
a  case  where  the  vendor  remained  in  possession  of  the  entire  bulk, 
a  part  of  which  he  had  sold;  but  the  vendee,  in  pursuance  of  the 
contract  of  sale,  had  taken  possession  of  the  whole,  for  the  purpose 
of  separating  and  securing  his  part.  In  this  respect,  the  case  at  bar 
differs  from  the  numerous  class  of  cases  upon  which  the  decision 
of  Scudder  v.  Worster  is  founded.  And  it  appears  to  a  majority 
of  the  court  that  this  is  a  material  distinction.  The  principle  upon 
which  those  decisions  rest  is,  that  the  sale  is  still  inchoate  and  incom- 
plete between  the  parties ;  there  being  no  such  separation  or  desig- 
nation of  the  property  sold,  as  to  constitute  delivery  of  it  by  the  ven- 
dor, and  possession  of  it  by  the  vendee,  and  thus  pass  the  right  of 
property  in  the  articles  sold.  It  is  an  unexecuted  contract  of  sale, 
an  essential  ingredient  being  wanting  to  make  it  perfect  between  the 
parties.  But  in  the  case  at  bar  the  contract  was  complete  and 
executed.  Nothing  further  remained  to  be  done  by  the  mortgagor. 
The  mortgagee  had  received  from  him  delivery  of  the  property 
included  in  the  mortgage,  and,  although  it  made  part  of  a  larger 
mass,  it  was  none  the  less  a  delivery  to  and  possession  by  him  of 
the  portion  included  in  the  mortgage.  The  property  in  the  part 
mortgaged  passed,  it  being  left  to  the  mortgagee  to  select  and  separate 
it  from  the  whole,  which  was  placed  in  his  possession  and  control 
for  that  purpose.  Under  such  circumstances,  it  is  very  clear  that 
neither  the  mortgagor,  nor  those  claiming  under  him,  could  dispute 
the  right  of  the  plaintiff  to  hold  the  entire  property,  until  the  object 
for  which  its  possession  was  delivered  to  him  should  have  been 
accomplished.     The  right  of  possession  of  the  entire  bulk  has  become 


338 


COMMERCIAL    LAW    CASES 


legally  vested  in  the  mortgagee  for  a  lawful  purpose ;  neither  the 
mortgagor  nor  his  assigns  had  the  possession  or  the  right  to  the 
immediate  possession  of  it;  neither  of  them,  therefore,  could  maintain 
trespass  or  trover  against  the  mortgagee ;  nor  could  a  creditor  of  the 
mortgagor,  by  attachment  on  mesne  process,  or  seizure  on  execution, 
disturb  a  possession  thus  acquired.  The  power  to  hold  the  whole 
property  by  the  mortgagee  was  coupled  with  an  interest  in  him, 
which  neither  the  mortgagor  nor  his  creditors  could  defeat.  The 
right  of  all  persons,  claiming  title  under  the  mortgagor,  to  the 
property  not  included  in  the  mortgage,  must  be  taken  to  be  subordinate 
to  the  right,  previously  acquired  by  the  mortgagee,  of  holding  the 
whole  in  his  possession,  until,  by  the  use  of  due  and  reasonable 
diligence,  he  had  separated  and  taken  out  the  portion  mortgaged 
to  him. 

For  these  reasons,  a  majority  of  the  court  are  of  opinion  that 
this  case  does  not  come  within  the  rule  touching  sales  of  property 
in  bulk  in  the  hands  of  a  vendor,  where  there  is  no  designation  or 
separation  of  the  portion  sold,  but  that  it  comes  within  a  distinct 
class.  The  principle  on  which  it  rests  is,  that  the  delivery  of  the 
entire  mass  to  the  vendee  under  the  contract  of  sale,  for  the  purpose 
of  enabling  him  to  separate  and  take  out  the  portion  sold,  makes  the 
sale  and  delivery  complete  between  the  parties ;  that  thereby  the 
property  in  the  articles  sold  passes  out  of  the  vendor  and  vests  in 
the  vendee,  who  has  the  right  to  retain  the  whole,  until  he  has  had 
sufficient  time  and  opportunity  to  separate  and  take  out  the  part 
belonging  to  him  in  pursuance  of  the  contract  of  sale. 

9.    Effect  of  Delivery  to  Common  Carrier. 

Wigton  v.  Boivlcy.    i^o  Mass.  2^2. 

Fenno  ordered  a  carload  of  flour  from  Wigton's  firm,  which 
they  shipped  to  him  as  consignee.  They  drew  a  draft  on  him, 
which  with  the  bill  of  lading  they  sent  to  a  bank  in  Boston,  with 
instructions  to  deliver  the  bill  of  lading  to  Fenno,  if  the  draft 
was  accepted.  This  Fenno  did  not  do.  He,  however,  executed 
to  Bowley's  firm  an  order  on  the  railroad  company  to  deliver 
the  flour  to  them,  which  the  railroad  company  did  without  requir- 
ing the  production  of  the  bill  of  lading.  Wigton's  firm  now 
attempts  to  recover  the  value  of  the  flour  from  Bowley's  firm. 

Held,  that  delivery  of  goods  to  a  common  carrier  in  the 
absence  of  other  evidence  passes  the  title  to  the  goods  to  the  con- 
signee. 

Colt,  J. 

The  receipt  given  by  the  railroad,  sometimes  called  the  shipping 
receipt  or  bill  of  lading,  was  taken  in  [Fcnno'sJ  name.  The  plaintiffs 
did    not    intend   to   retain   their   hold   on   the   property,   after    it   was 


SALES  339 

taken   by  the   carrier,   as   security    for   the    payment    of   the   price. 

In  the  sale  of  specific  chattels,  an  unconditional  delivery  to  the 
buyer  or  his  agent,  or  to  a  common  carrier  consigned  to  him,  whether 
a  bill  of  lading  is  taken  or  not,  is  sufficient  to  pass  the  title,  if  there 
is  nothing  to  control  the  effect  of  it.  If  the  bill  of  lading  or  written 
evidence  of  the  delivery  to  a  carrier  be  taken  in  the  name  of  the 
consignee,  or  be  transferred  to  him  by  indorsement,  the  strongest 
proof  is  afforded  of  the  intention  to  transfer  the  property  to  the 
vendee.  If  the  vendor  intends  to  retain  the  right  to  dispose  of  the 
goods  while  they  are  in  course  of  transportation,  he  must  manifest 
that  intention  at  the  time  of  their  delivery  to  the  carrier.  It  is  not 
the  secret  purpose,  but  the  intention  as  disclosed  by  the  vendor's  acts 
and  declarations  at  the  time,  which  governs.  Where  there  is  con- 
flicting evidence  as  to  intention,  the  question  is  for  the  jury.  It 
cannot  be  disposed  of  as  matter  of  law,  unless  the  evidence  will 
justify  a  finding  but  one  way. 

In  the  case  at  bar,  the  fact  that  the  shipping  receipt  was  not 
delivered  to  Fenno,  but  was  sent  with  the  draft  to  a  bank  in  Boston, 
is  not  conclusive  evidence,  as  against  the  rights  of  the  consignee, 
that  the  plaintiffs  intended  not  to  part  with  the  title.  It  was  no  part 
of  the  contract  of  sale.  It  was  given  in  the  name  of  Fenno,  and 
could  not  be  transferred  by  the  plaintiff's  so  as  to  change  title  in  the 
property  without  his  indorsement.  What  passed  between  the  plain- 
tiffs and  the  bank  in  Boston,  not  communicated  to  Fenno,  cannot 
affect  his  rights. 

It  is  not  shown  that  the  acceptance  or  payment  of  the  draft  was 
a  condition  precedent  to  a  change  of  title;  and  the  finding  of  the 
court  below  cannot  be  disturbed. 

ID.     Effect  of  Delivery  to  Carrier  of  Goods  Agreed  to  be  De- 
livered. 

McNcal  V.  Braun.  5J  A^.  /.  L.  617. 

Braun,  a  coal  dealer  in  Philadelphia,  agreed  to  sell  and  deliver 
coal  to  McNeal  at  Burlington.  He  shipped  this  coal  by  a  barge 
to  Burlington,  where  it  arrived  safe  alongside  McNeal's  wharf 
Before  it  was  unloaded,  the  barge  sank.  Braun  sues  for  the  price, 
claiming  that  title  passed  although  he  had  agreed  to  deliver  the 
coal  to  McNeal. 

Held,  that  title  to  property  does  not  pass  until  delivery,  when 
the  contract  requires  such  delivery. 

Depue,  J. 

It  is  sometimes  stated,  as  a  general  rule,  that  delivery  to  the 
carrier  is  delivery  to  the  consignee,  and  that  the  goods  are  to  be 
carried  to  their  destination  at  his  risk.  But  an  examination  of  the 
decisions  to  that  effect  will  show  that  this  doctrine   prevails   only 


340  COMMERCIAL    LAW    CASES 

where  the  contract  of  sale,  as  between  the  consig-nor  and  consignee, 
was  concluded  at  the  place  of  shipment,  and  the  undertaking  to  ship 
was  collateral  to  the  contract  of  sale.  It  will  also  be  found  that 
the  rule,  uniformly  adapted  in  the  line  of  decisions,  is  that  the  risk 
of  loss  in  transportation  depends  upon  the  nature  of  the  transaction, 
the  terms  of  the  contract  and  the  intention  of  the  parties.  "When 
the  party  undertaking  to  consign  undertakes  to  deliver  at  a  particular 
place,  the  property,  till  it  reaches  that  place  and  is  delivered  according 
to  the  terms  of  the  contract,  is  at  the  risk  of  the  consignor."  '"There 
is  no  rule  of  law  to  prevent  the  parties  from  making  whatever 
bargain  they  please.  If  they  use  words  in  the  contract  showing 
that  they  intend  that  the  goods  shall  be  shipped  by  the  person  who 
is  to  supply  them,  on  terms  that  when  shipped  they  shall  be  the 
consignee's  property  and  at  his  risk,  so  that  the  vendor  shall  be 
paid  for  them  whether  they  are  delivered  at  the  port  of  destination 
or  not,  this  intention  is  effectual.  If  the  parties  intend  that  the 
vendor  shall  not  only  deliver  them  to  the  carrier,  but  also  undertake 
that  they  shall  actually  be  delivered  at  their  destination,  and  express 
such  intention,  this  is  also  effectual.  In  such  a  case,  if  the  goods 
perish  in  the  hands  of  the  carrier,  the  vendor  is  not  only  not  entitled 
to  the  price,  but  he  is  liable  for  whatever  damage  may  have  been 
sustained  by  the  purchaser  in  consequence  of  the  breach  of  the  ven- 
dor's contract  to  deliver  at  the  place  of  destination." 

"In  every  contract  of  sale,  there  is,  on  the  part  of  the  vendor, 
an  obligation  not  only  to  transfer  the  property  in  the  thing  sold,  but 
also  to  deliver  possession  to  the  buyer.  When  and  how  that  delivery 
of  possession  shall  take  place,  whether  in  the  interval  the  thing  sold 
shall  be  at  the  risk  of  the  buyer  or  of  the  seller,  so  that  if  it  be 
lost  without  default  on  the  part  of  the  latter,  he  shall  nevertheless 
be  entitled  to  demand  the  price  or  to  retain  it  if  already  paid,  must 
depend  on  the  agreement  of  the  parties  as  expressed  or  to  be  gathered 
from  the  contract.  If,  by  the  terms  of  the  contract,  the  seller  engages 
to  deliver  the  thing  sold  at  a  given  place,  and  there  be  nothing  to 
show  that  the  thing  sold  was  in  the  meantime  to  be  at  the  risk  of  the 
buyer,  the  contract  is  not  fulfilled  by  the  seller  unless  he  delivers  it 
accordingly." 

II.     Sales  by  Auction. 

Anderson  v.  Wisconsin  Central  Raihvay  Company.  loy  Minn. 
2g6. 

The  railway  coni])any  advertised  a  sale  of  property  at  public 
auction.  Bids  were  made  until  tiie  amount  reached  $675.  Ander- 
son bid  $680  but  the  auctioneer  refused  to  accept  this  bid,  insist- 
ing that  the  amount  of  the  raise  was  too  small ;  and  sold  to  the 
next  highest  bidder.     Anderson  sues  for  damages. 

Held,  that  in  a  sale  by  auction  bids  may  be  retracted  or  the 
property  withdrawn  from  sale  until  the  fall  of  the  hammer. 


SALES  341 

Elliott,  J. 

The  custom  of  selling  goods  at  auction  is  as  old  as  the  law  of 
sale.  In  Rome,  military  spoils  were  disposed  of  at  the  foot  of  the 
spear — sub  hastio — by  auction,  or  increase.  In  later  times  we  find 
a  mode  of  auction  called  a  "sale  by  the  candle,"  or  by  the  "inch  of 
candle,"  which  consisted  of  offering  the  property  for  sale  for  such 
a  length  of  time  as  would  suffice  for  the  burning  of  an  inch  of  candle. 
In  Holland  they  inverted  the  usual  process,  and  put  the  property  up 
at  a  price  usually  greater  than  its  value,  and  then  gradually  lowered 
the  price  until  some  one  closed  the  sale  by  accepting  the  offer  and 
thus  becoming  the  purchaser.  In  ancient  Babylon  the  young  women 
were  sold  at  a  public  auction  according  to  a  method  which  combined 
the  features  of  the  Dutch  and  ordinary  kinds  of  auctions.  The  group 
of  prospective  wives  would  ordinarily  contain  some  who,  by  reason 
of  personal  beauty,  were  thought  more  desirable  than  others.  The 
attractive  ones  were  first  sold  to  the  highest  bidders.  When  the 
supply  of  this  quality  was  exhausted,  those  less  favored  by  nature 
were  offered  and  sold  to  the  bidders  who  would  take  them  with  the 
least  dowry,  which  was  payable  out  of  the  money  received  from  the 
sale  of  the  beauties.  Herodotus  considered  this  custom  very  com- 
mendable. 

The  idea  that  an  auction  will  lie  for  the  breach  of  an  implied 
undertaking  to  sell  to  the  highest  bidder  was  advanced  in  Warlow  v. 
Harrison,  1  El.  &  El.  309,  and  dicta  supporting  it  will  be  found. 
These  cases  assume  that  an  offer  to  sell  property  at  auction  is  indis- 
tinguishable from  the  case  of  an  oft'er  to  the  general  public,  such 
as  a  reward  for  the  return  of  lost  property,  where  it  is  held  that 
contract  rights  are  created  in  favor  of  one  who  complies  with  the 
conditions  of  the  offer.  Langdell  seems  to  be  the  only  text-writer 
who  takes  this  view  of  what  the  law  should  be. 

Sale  of  Goods  Act,  1893,  provides  that  "a  sale  by  auction  is 
complete  when  the  auctioneer  announces  its  completion  by  the  fall 
of  the  hammer,  or  in  other  customary  manner.  Until  such  announce- 
ment is  made  any  bidder  may  retract  his  bid."  Whatever  may  have 
been  the  law  formerly,  this  statute  entitles  a  bidder  to  withdraw  his 
bid  at  any  time  before  the  fall  of  the  hammer,  and  the  vendor  must 
be  equally  free  to  withdraw  his  offer  to  sell,  because  one  party 
cannot  be  bound  while  the  other  is  free. 

The  earnestness  with  which  the  respondent  contends  that  the 
trial  court  was  right  in  holding  that  the  contract  was  complete  when 
the  bid  was  made,  conditional  on  there  being  no  higher  bid,  has 
induced  us  to  make  a  somewhat  extended  examination  of  the  author- 
ities. The  result  discloses  the  fact  that  there  has  been  running 
through  some  of  the  English  cases  a  recognized,  but  never  applied, 
principle  which  would  sustain  the  right  of  action  in  such  a  case  as 
the  present.  But  all  the  cases  in  which  the  doctrine  is  recognized 
were  decided  on  other  grounds.  No  substantial  support  for  the 
doctrine  is  found  in  the  American  cases.  It  is,  in  fact,  utterly 
irreconcilable  with  principles  which  are  universally  recognized. 


342  COMMERCIAL    LAW    CASES 

Mutuality  is  an  essential  element  of  a  contract.  One  party 
thereto  cannot  be  bound,  and  the  other  remain  free.  If  the  announce- 
ment of  an  auction  is  an  offer  to  sell  to  the  highest  good-faith  bidder, 
and  the  contract  is  closed  when  the  bid  is  made,  both  the  vendor  and 
the  vendee  must  be  bound  thereby.  But  it  is  conceded  by  all  the 
authorities  that  the  bidder  may  withdraw  his  bid  at  any  time  before 
the  hammer  falls,  and  this  means  necessarily  that  the  bid  is  a  mere 
offer  which  is  not  binding  until  accepted. 

On  principle  and  authority  the  correct  rule  is  that  an  announce- 
ment, that  a  person  will  sell  his  property  at  public  auction  to  the 
highest  bidder,  is  a  mere  declaration  of  intention  to  hold  an  auction 
at  which  bids  will  be  received ;  that  a  bid  is  an  offer  which  is  accepted 
when  the  hammer  falls,  and  until  the  acceptance  of  the  bid  is  signified 
in  some  manner  neither  party  assumes  any  legal  obligation  to  the 
other.  At  any  time  before  the  highest  bid  is  accepted,  the  bidder 
may  withdraw  his  offer  to  purchase  or  the  auctioneer  his  offer  to  sell. 
The  owner's  offer  to  sell  is  made  at  the  time  through  the  auctioneer, 
and  not  when  he  advertises  the  auction  sale.  A  merchant  advertises 
that  on  a  certain  day  he  will  sell  his  goods  at  bargain  prices;  but  no 
one  imagines  that  the  prospective  purchaser,  who  visits  the  store  and 
is  denied  the  right  to  purchase,  has  an  action  for  damages  against 
the  merchant.  He  merely  offers  to  purchase,  and  if  his  offer  is 
refused,  he  has  no  remedy,  although  he  may  have  lost  a  bargain,  and 
have  incurred  expense  and  lost  time  in  visiting  the  store.  The 
analogy  between  such  a  transaction  and  an  auction  is  at  least  close. 
As  the  advertisement  in  this  case  was  a  mere  statement  of  intention 
to  offer  the  property  for  sale  at  public  auction  to  the  highest  bidder, 
the  respondent's  bid  did  not  complete  either  a  contract  of  sale  or  a 
contract  to  make  a  sale. 

12.     Effect  of  Bill  of  Lading. 

Merchants'  National  Bank  of  Cincinnati  v.  Bangs.  102  Mass. 
2gi. 

Bangs  ordered  four  carloads  of  corn  from  Schwartz  &  Co. 
of  Cincinnati.  Schwartz  &  Co.  sent  him  three  carloads,  one  of 
which  was  short  in  weight.  They  drew  sight  drafts  on  him  for 
the  price  of  three  cars  as  of  full  weight,  which  he  paid.  They  later 
delivered  to  the  railroad  company  a  car  of  corn  consigned  to  him, 
taking  a  bill  of  lading  naming  Bangs  as  consignee,  to  which  they 
attached  a  draft  on  Bangs  which  they  discounted  with  the  bank. 
i->angs  refused  to  accejH  the  draft  and  the  bank  refused  to  allow 
him  to  take  the  corn.  He,  however,  did  secure  the  corn  by  paying 
the  railroad  freight  charges.  The  bank  sues  Bangs  for  conver- 
sion. Bangs  defends  on  the  groimd  that  the  drafts  drawn  on  him 
were  incorrect,  thai  be  was  not  obliged  to  accept  them,  and  that 
be  consequently  bad  title  to  the  property. 


SALES  343 

Held,  that  a  bill  of  lading  taken  in  the  name  of  the  consignee 
is  evidence  that  the  title  to  the  goods  has  passed  to  him  absolutely. 

Colt,  J. 

In  all  completed  contracts  of  sale,  property  in  the  goods  sold 
passes  to  the  buyer,  although  he  may  not  have  come  to  his  actual 
possession.  An  unconditional  sale  of  specific  chattels  passes  the  title 
at  once,  and  the  buyer  takes  the  risk  of  loss,  and  has  the  right  to 
immediate  possession.  When  anything  remains  to  be  done,  in  the 
way  of  specifically  appropriating  the  goods  sold  to  the  contract,  the 
agreement  is  executory  and  the  property  does  not  pass.  When,  from 
the  nature  of  the  agreement,  the  vendor  is  to  make  the  appropriation, 
then,  as  soon  as  any  act  is  done  by  him,  identifying  the  property, 
and  it  is  set  apart  with  the  intention  unconditionally  to  apply  it  in 
fulfilment  of  the  contract,  the  title  vests,  and  the  sale  is  complete. 
Thus  the  delivery  to  the  buyer  or  his  agent,  or  to  a  common  carrier, 
consigned  to  him,  whether  a  bill  oi  lading  is  taken  or  not,  if  there 
is  nothing  in  the  circumstances  to  control  the  effect  of  the  trans- 
action, will  be  sufficient.  If  the  bill  of  lading  or  other  written 
evidence  of  the  delivery  to  the  carrier  be  taken  in  the  name  of  the 
consignee,  or  be  transferred  to  him  by  indorsement,  the  strongest 
proof  is  afforded  of  the  intention  to  transfer  an  absolute  title  to  the 
vendee.  But  the  vendor  may  retain  his  hold  upon  the  goods  to 
secure  payment  of  the  price,  although  he  puts  them  in  course  of 
transportation  to  the  place  of  destination,  by  delivery  to  the  carrier. 
The  appropriation  which  he  then  makes  is  said  to  be  provisional  or 
conditional.  He  may  take  the  bill  of  lading  or  carrier's  receipt,  in 
his  own  or  some  agent's  name,  to  be  transferred  on  payment  of  the 
price,  by  his  own  or  his  agent's  indorsement  to  the  purchaser,  and 
in  all  cases  when  he  manifests  an  intention  to  retain  this  jus  dis- 
ponendi,  the  property  will  not  pass  to  the  vendee.  Practically  the 
difficulty  is  to  ascertain,  when  the  evidence  is  meagre  or  equivocal, 
what  the  real  intention  of  the  parties  was  at  the  time.  It  is  properly 
a  question  of  fact  for  the  jury,  under  proper  instructions,  and  must 
be  submitted  to  them,  unless  it  is  plain  as  a  matter  of  law  that  the 
evidence  will  justify  a  finding  but  one  way. 

13.     Effect  of  Invoice. 

Hopkins  V.  Coiven.  go  Md.  152. 

Hopkins  bought  a  quantity  of  flour  from  the  Winnebago  City 
Mill  Company  without  any  stipulation  as  to  the  time  of  payment. 
The  flour  was  delivered  to  the  railroad,  of  which  the  defendants 
were  receivers,  and  Hopkins  was  notified  that  the  seller  had 
deposited  in  the  bank  a  draft  for  the  price  attached  to  the  bill  of 
lading.  By  the  bill  of  lading  the  flour  was  consigned  to  the  Mill 
Company,  with  a  direction  to  notify  the  plaintiff,  to  whom  an 


344  COMMERCIAL    LAW    CASES 

invoice  was  sent  direct.  Hopkins  made  no  offer  to  pay  the  draft 
until  several  vi^eeks  later,  when  the  bank  had  been  instructed  not 
to  accept  payment  or  deliver  the  bill  of  lading.  Hopkins  claims 
that  the  title  had  passed  to  him  and  seeks  to  secure  the  goods  from 
the  railroad. 

Held,  that  an  invoice  is  not  ordinarily  significant  of  the  intent 
of  the  parties  relative  to  passing  of  title. 

Page,  /. 

The  general  rule  applicable  to  the  passing  of  title  to  personal 
property  has  been  well  stated,  "where  there  is  a  sale  of  goods 
generally,  no  property  in  them  passes  till  delivery,  because  until  then 
the  very  goods  sold  are  not  ascertained;  but  when,  by  the  contract 
itself,  the  vendor  appropriates  to  the  vendee  a  specific  chattel,  and 
the  latter  thereby  agrees  to  take  that  specific  chattel,  and  to  pay  the 
stipulated  price,  the  parties  are  then  in  the  same  situation  as  they 
would  be  after  a  delivery  of  goods  in  pursuance  of  a  general  contract. 
The  very  appropriation  of  the  chattel  is  equivalent  to  delivery  by 
the  vendor,  and  the  assent  of  the  vendee  to  take  the  specific  chattel, 
and  to  pay  the  price,  is  equivalent  to  his  accepting  possession.  The 
effect  of  the  contract,  therefore,  is  to  vest  the  property  in  the 
bargainee."  The  fundamental  principle  upon  which  this  rule  rests 
is  to  carry  out  the  intention  of  parties  who  have  agreed  "with  respect 
to  a  thing  capable  of  identification,  that  for  an  agreed  price  the  title 
to  the  thing  shall  pass  from  the  vendor  to  the  vendee." 

When  the  contract  is  express,  there  can  be  no  difficulty;  but 
when  the  evidence  with  respect  to  it  is  meagre,  courts  must  endeavor 
"to  ascertain  the  intent  of  the  parties  and  apply  that  test  as  a 
controlling  principle."  So  also  where  the  agreement  is  for  a  sale 
of  the  property,  and  the  performance  of  other  things,  it  must  be 
ascertained  whether  the  performance  of  any  of  those  things  is  meant 
to  precede  the  vesting  of  the  title  in  the  vendee.  Accordingly,  it  is 
held  that  where  a  buyer  purchases  a  specific  quantity  of  goods  to  be 
shipped  to  him  from  a  distant  place,  and  the  seller  segregates  and 
appropriates  to  the  contract  the  specified  quantity  by  delivering  them 
to  a  carrier,  the  law  presumes  that  to  be  equivalent  to  delivery  to 
the  vendee,  and  in  such  case  the  goods  become  the  property  of  the 
vendee,  although  they  are  to  be  paid  for  on  arrival,  the  carrier  being 
regarded  as  the  agent  of  the  vendee  to  receive  it.  But  if  the  vendor 
undertake  to  make  delivery  himself  at  a  distant  place,  the  carrier 
becomes  the  agent  of  the  vendor,  and  the  property  will  not  pass 
until  delivery  is  made.  In  both  such  cases,  the  inference  arising  from 
the  facts  stated  may  be  rebutted  by  other  circumstances  which  tend 
to  show  what  the  interest  of  the  parties  really  was. 

The  whole  course  of  these  dealings  shows  that  the  Mill  Company 
was  to  pay  the  freight  and  deliver  the  flour  in  the  city  of  Baltimore, 
and  that  the  appellant  was  not  to  be  entitled  to  possession  until  after 
the   draft   had  been   paid.     The   invoice   cannot   have   the   effect  of 


SALES  345 

modifying  the  contract,  which  the  facts  so  clearly  imply.  The  purpose 
and  effect  of  that  was  to  give  a  description  and  cost  of  the  goods; 
it  was  not  "a.  bill  of  sale  nor  evidence  of  a  sale,"  and  even  though 
in  some  cases  it  may  be  useful,  in  connection  with  other  facts, 
to  show  the  intent  of  the  parties,  yet  in  this  case  no  inferences  can 
flow  from  it  tending  to  alter  or  change  the  intent  inferable  from 
the  circumstances  already  stated,  for  the  reason  that,  appended  to 
the  invoice,  as  a  part  of  it,  was  the  explicit  statement  that  the  Mill 
Company  had  drawn  on  the  appellant  at  arrival  for  the  proceeds 
"with  railroad  receipt  attached  to  the  draft." 

Upon  the  whole  offer,  it  seems  to  us  clear  that  it  was  not  the 
intent  of  the  parties  that  the  title  to  the  flour  should  pass  to  the 
appellant  until  the  draft  had  been  paid. 

14.    Effect  of  Transfer  of  Bill  of  Lading. 

Shaw  V.  Railroad  Company.  loi  U.  S.  557. 

Norvell  &  Company  of  St.  Louis  sold  The  Merchants' 
National  Bank  a  draft  on  Kuhn  &  Brother  of  Philadelphia  and 
delivered  to  it  as  collateral  security  an  original  bill  of  lading  for 
170  bales  of  cotton  sold  to  Kuhn  &  Brother.  The  duplicate  bill 
of  lading  was  forwarded  on  the  same  day  to  Kuhn  &  Brother. 
The  draft  was  presented  to  Kuhn  &  Brother  who  accepted  it, 
but  fraudulently  substituted  their  duplicate  bill  of  lading  for  the 
original  bill.  Kuhn  &  Brother  then  indorsed  the  original  bill 
to  Miller  &  Brother  as  security  for  an  advance  and  they,  with  the 
approval  of  Kuhn  &  Brother,  sold  the  cotton  to  Shaw  &  Esrey. 
The  Merchants'  National  Bank  attempts  to  recover  possession  of 
the  cotton,  Kuhn  &  Brother  having  failed. 

Held,  that  the  transfer  of  a  bill  of  lading  without  authority 
does  not  transfer  title. 

Strong,  J. 

It  does  not  necessarily  follow  that,  because  a  statute  has  made 
bills  of  lading  negotiable  by  indorsement  and  delivery,  all  conse- 
quences of  an  indorsement  and  delivery  of  bills  and  notes  before 
maturity  ensue  or  are  intended  to  result  from  such  negotiation. 

The  function  of  [a  bill  of  lading]  is  entirely  different  from  that 
of  a  bill  or  note.  It  is  not  a  representative  of  money,  used  for  trans- 
mission of  money,  or  for  the  payment  of  debts  or  for  purchases.  It 
does  not  pass  from  hand  to  hand  as  banknotes  or  coin.  It  is  a 
contract  for  the  performance  of  a  certain  duty.  True,  it  is  a  symbol 
of  ownership  of  the  goods  covered  by  it — a  representative  of  those 
goods.  But  if  the  goods  themselves  be  lost  or  stolen,  no  sale  of  them 
by  the  finder  or  thief,  though  to  a  bona  fide  purchaser  for  value, 
will  divest  the  ownership  of  the  person  who  lost  them,  or  from  whom 
they  were  stolen.  Why,  then,  should  the  sale  of  the  symbol  or  mere 
representative  of  the  goods  have  such  an  effect?     It  may  be  that  the 


34^  COMMERCIAL    LAW    CASES 

true  owner,  by  his  negligence  or  carelessness,  may  have  put  it  in 
the  power  of  a  finder  or  thief  to  occupy  ostensibly  the  position  of  a 
true  owner,  and  his  carelessness  may  estop  him  from  asserting  his 
right  against  a  purchaser  who  has  been  misled  to  his  hurt  by  that 
carelessness.  But  the  present  is  no  such  case.  It  is  established  by 
the  verdict  of  the  jury  that  the  bank  did  not  lose  its  possession  of 
the  bill  of  lading  negligently.  There  is  no  estoppel,  therefore,  against 
the  bank's  right. 

Bills  of  lading  are  regarded  as  so  much  cotton,  grain,  iron,  or 
other  articles  of  merchandise.  The  merchandise  is  very  often  sold 
or  pledged  by  the  transfer  of  the  bills  which  cover  it.  They  are,  in 
commerce,  a  very  different  thing  from  bills  of  exchange  and  promis- 
sory notes,  answering  a  different  purpose  and  performing  different 
functions.  It  cannot  be,  therefore,  that  the  statute  which  made  them 
negotiable  by  indorsement  and  delivery,  or  negotiable  in  the  same 
manner  as  bills  of  exchange  and  promissory  notes  are  negotiable, 
intended  to  change  totally  their  character,  put  them  in  all  respects 
on  the  footing  of  instruments  which  are  the  representatives  of  money, 
and  charge  the  negotiation  of  them  with  all  the  consequences  which 
usually  attend  or  follow  the  negotiation  of  bills  and  notes.  Some  of 
these  consequences  would  be  very  strange  if  not  impossible.  Such 
as  the  liability  of  indorsers,  the  duty  of  demand  ad  diem,  notice  of 
non-delivery  by  the  carrier,  &c.,  or  the  loss  of  the  owner's  property 
ty  the  fraudulent  assignment  of  a  thief.  If  these  were  intended, 
surely  the  statute  would  have  said  something  more  than  merely  make 
them  negotiable  by  indorsement.  No  statute  is  to  be  construed  as 
altering  the  common  law,  further  than  its  words  import.  It  is  not 
to  be  construed  as  making  any  innovation  upon  the  common  law 
which  it  does  not  fairly  express.  Especially  is  so  great  an  innovation 
as  would  be  placing  bills  of  lading  on  the  same  footing  in  all  respects 
with  bills  of  exchange  not  to  be  inferred  from  words  that  can  be 
fully  satisfied  without  it.  The  law  has  most  carefully  protected  the 
ownership  of  personal  property,  other  than  money,  against  mis- 
appropriation by  others  than  the  owner,  even  when  it  is  out  of  his 
possession.  This  protection  would  be  largely  withdrawn  if  the  mis- 
appropriation of  its  symbol  or  representative  could  avail  to  defeat 
the  ownership,  even  when  the  person  who  claims  under  a  misappro- 
priation had  reason  to  believe  that  the  person  from  whom  he  took 
the  property  had  no  right  to  it. 

15.     Effect  of  Transfer  of  Warehouse  Receipt. 

Commercial  Bank  of  Sclma  v.  Hurt,  pp  Ala.  ijo. 

Hurt  shipped  cotton  to  H.  C.  Keeble  Company,  commission 
merchants,  at  Selma,  with  instructions  to  hold  the  cotton  until 
ordered  to  sell.  The  Keeble  Company  dei)Osited  the  cotton  in  a 
warehouse,  took  warehouse  receipts  in  its  own  name,  borrowed 
money  from  the  Commercial  Bank  on  them,  and  gave  them  to 
the  hank  as  collateral  security   for  money  loaned.     The  Keeble 


SALES  347 

Company  failed.    Hurt  sues  to  recover  the  cotton  from  the  ware- 
houseman, it  being  also  claimed  by  the  bank. 

Held,  that  the  transfer  of  a  warehouse  receipt  does  not  pass 
title  to  goods  against  the  rightful  owner. 

Walker,  J. 

Under  the  common  law,  a  factor  or  commission-merchant  has 
no  implied  authority  to  pledge  the  goods  of  his  principal  for  his  own 
use.  Unless  the  result  is  controlled  by  some  statute,  the  attempted 
pledge  does  not  work  a  divestiture  of  the  title  of  the  principal,  and 
the  party  receiving  such  a  pledge  and  advancing  his  money  acquires 
no  right  to  the  property  as  agains:  the  principal,  whether  he  knew 
he  was  dealing  with  a  factor  or  not. 

In  England,  and  in  several  of  the  States  in  this  country,  statutes 
have  been  enacted  for  the  protection  of  third  persons  who,  in  good 
faith  and  in  ignorance  of  any  defects  of  title,  advance  money  or  incur 
obligations  on  the  faith  of  property  which  is  apparently  owned  by 
the  persons  with  whom  they  deal,  who,  however,  in  fact,  hold  it 
merely  as  factors  or  agents,  having  been  intrusted  by  the  owners 
with  possession  of  the  property  or  of  documentary  evidence  of  title 
to  it.  Decisions  controlled  by  such  statutes  have  no  bearing  upon 
this  case,  as  we  have  no  statute  purporting  to  change  the  common 
law  rule  which  protects  the  owner  against  an  unauthorized  pledge 
of  his  property  by  one  who,  as  factor  or  agent  to  sell,  has  been 
intrusted  with  the  possession  and  custod}-  of  it.  No  statute  is  appealed 
to  which  could  give  any  color  to  a  claim  that  an  unauthorized  pledge 
by  a  factor  of  the  property  itself  which  was  intrusted  to  him  would 
have  any  other  effect  as  against  the  principal  than  was  accorded  to 
such  a  transaction  by  the  common  law. 

The  apparent  object  of  the  statutory  provisions  in  reference  to 
warehouse  receipts  is  to  give  them,  for  the  purposes  of  commerce, 
recognition  and  credit  as  substitutes  for  the  property  described  in 
them,  and  to  give  dealings  in  them  the  same  effect  as  similar  dealings 
with  the  property  itself.  We  think  they  are  made  negotiable  only 
in  the  sense  that  in  their  passage  tlirough  the  channels  of  commerce 
the  law  regards  the  property  wliich  they  describe  as  following  them, 
and  gives  to  their  regular  transfer  by  indorsement  the  effect  of  a 
manual  delivery  of  the  things  specified  in  them.  No  intention  is 
disclosed  to  give  dealings  in  them  any  more  controlling  effect  upon 
the  title  to  the  property  they  represent  than  would  be  given  to  similar 
dealings  Vv'ith  the  property  itself.  At  last,  they  are  mere  tokens  of 
possession,  and  not  guaranties  of  title  by  the  person  issuing  them. 
The  warehouseman  holds  himself  out  as  the  custodian,  for  the  legal 
holder  of  the  receipt,  of  the  property  mentioned  in  it,  but  he  does  not 
warrant  the  title  of  the  property  against  the  claims  of  strangers  to 
the  contract  of  storage. 

As  representatives  of  property,  bills  of  lading  and  warehouse 
receipts  are  instruments  of  similar  character.     They  are  dealt  with 


34^  COMMERCIAL    LAW    CASES 

as  substitutes  for  the  property  itself.  The  assignment  of  a  bill  of 
lading  for  value,  while  the  goods  are  in  transit,  is  limited  to  the 
effect  of  symbolizing  their  sale  and  delivery,  and  the  assignee  is 
thereby  invested  with  all  the  rights  of  a  purchaser  with  actual  delivery 
of  possession,  but  no  more. 

Our  conclusion  is,  that  it  would  be  a  perversion  of  the  manifest 
purpose  of  the  statute  to  construe  it  as  having  the  effect  of  putting 
the  symbol  of  the  property  upon  a  higher  plane,  as  an  evidence  of 
title,  than  the  actual  possession  of  property  it  describes.  The  statute 
does  not  undertake  to  make  the  transfer  and  delivery  of  the  symbol 
more  than  the  equivalent  of  an  actual  transfer  and  delivery  of  the 
property  itself. 

B.     Risk. 

I.    Goods  at  Risk  of  Owner. 

Race  V.  Hansen.  12  III.  App.  6oj. 

Race  sold  Hansen  and  Pheiffer  a  cow  which  he  kept  in  the 
pasture  of  a  third  party.  The  price  was  paid  and  it  was  agreed 
that  the  cow  should  be  left  in  the  pasture  for  a  few  days.  When 
Pheiffer  came  for  the  cow  the  next  day,  she  was  gone.  There 
was  no  evidence  to  indicate  how  she  had  escaped,  as  the  pasture 
was  properly  fenced.  The  purchasers  sue  to  recover  the  money 
paid. 

Held,  that  after  a  sale,  the  risk  is  in  the  buyer  unless  there  is 
fault  of  the  seller. 

McAllister,  J. 

The  fence  around  the  lot  where  the  cow  was,  was  reasonably 
sufficient  and  secure.  There  was  no  evidence  tending  to  show  that 
the  cow  was  removed  from  the  pasture,  or  disposed  of  by  the 
defendant,  or  by  any  other  person,  through  his  direction,  permission 
or  authority,  or  tending  to  show  any  negligence  or  fault  on  the  part 
of  the  defendant  or  any  agent  or  servant,  in  respect  to  the  cow, 
while  so  left  in  said  pasture  after  the  sale. 

The  subject  of  tlie  contract  being  a  specific  article,  when  the 
bargain  was  struck,  and  the  consideration  paid,  the  transaction 
became  a  completed  sale  which  passed  the  property,  and  with  it  the 
risk,  from  the  seller  to  the  buyer,  notwithstanding  the  arrangement 
that  the  cow  might  remain  in  the  pasture  where  she  was  for  a 
specified  time. 

By  the  contract  of  sale  and  i)aymcnt  of  the  consideration,  the 
I)roperty  in  the  cow  i)assed  from  tlie  defendant  to  the  plaintiffs,  so 
'hat  from  that  time  she  was  wholly  at  the  risk  of  the  latter,  the 
former  being  liab'e  only  for  want  of  ordinary  care  or  bad  faith  as 
bailee,  which  contributed  to  the  loss  complained  of.     There  was  no 


SALES  349 

evidence  in  the  case  tending  to  prove  any  vi'ant  of  care  or  bad  faith 
on  the  part  of  the  defendant  in  respect  to  this  property,  and  conse- 
quently no  cause  of  action  was  shown. 

2,     Risk  on  Buyer  in  Conditional  Sale. 

Burnley  v.  Tufts.  66  Miss.  48. 

Tufts  sold  Burnley  a  soda  water  apparatus,  taking  notes  in 
payment,  which  recited  that  title  shotild  remain  in  Tufts  until 
all  notes  were  paid.  After  several  had  been  paid,  the  apparatus 
was  destroyed  by  fire  without  the  fault  of  either  party.  Burnley 
refuses  to  pay  the  remaining  note,  claiming  that  the  goods  were 
at  the  risk  of  the  owner. 

Hcldf  that  in  a  conditional  sale,  the  risk  is  on  the  buyer. 

Cooper,  J. 

Burnley  unconditionally  and  absolutely  promised  to  pay  a  certain 
sum  for  the  property  the  possession  of  which  he  received  from  Tufts. 
The  fact  the  property  has  been  destroyed  while  in  his  custody  and 
before  the  time  for  the  payment  of  the  note  last  due,  on  payment 
of  which  only  his  right  to  the  legal  title  of  the  property  would  have 
accrued,  does  not  relieve  him  of  payment  of  the  price  agreed  on. 
He  got  exactly  what  he  contracted  for,  viz.,  the  possession  of  the 
property  and  the  right  to  acquire  an  absolute  title  by  payment  of 
the  agreed  price.  The  transaction  was  something  more  than  an 
executory  conditional  sale.  The  seller  had  done  all  that  he  was 
to  do  except  to  receive  the  purchase  price ;  the  purchaser  had  received 
all  that  he  was  to  receive  as  the  consideration  of  his  promises  to  pay. 
The  inquiry  is  not  whether  if  he  had  foreseen  the  contingency  which 
has  occurred  he  would  have  provided  against  it,  nor  whether  he 
might  have  made  a  more  prudent  contract,  but  it  is  whether  by  the 
contract  he  has  made  his  promise  is  absolute  or  conditional.  The 
contract  made  was  a  lawful  one,  and,  as  we  have  said,  imposed  upon 
the  buyer  an  absolute  obligation  to  pay.  To  relieve  him  from  this 
obligation  the  court  must  make  a  new  agreement  for  the  parties, 
instead  of  enforcing  the  one  made,  which  it  cannot  do. 


C.     Rights  of  Innocent  Purchaser  from  Seller  not  Hav- 
ing Title. 

I.     General  Rule. 

Saltus  &'  Saltiis  v.  Everett.  20  Wend.  (N.  Y.)  26y. 

Bridge  and  Vose  consigned  lead  to  a  New  York  firm   for 
Everett,  the  plaintiff.     The  ship  by  which  the  lead  was  sent  put 


350  COMMERCIAL    LAW    CASES 

into  Norfolk  in  distress.  Part  of  the  lead  was  sold  to  pay  ex- 
penses and  the  remainder  sent  forward  by  another  ship  under  a 
bill  of  lading  running  to  the  master  of  the  first  ship.  The  master 
fraudulently  ordered  the  lead  delivered  to  another  New  York 
firm,  who  sold  the  lead  to  the  defendant  and  received  payment. 
Everett,  the  owner,  sues  to  recover  the  value  of  this  lead. 

Held,  that  an  innocent  third  person  acquires  no  right  to  prop- 
erty unless  the  vendor  has  title,  or  the  real  owner  is  estopped  to 
deny  the  vendor's  right  to  sell. 

Senator  Vcrplanck: 

The  main  question  depends  upon  and  involves  the  general  rule 
that  ought  to  govern,  between  the  conflicting  rights  of  bona  tide 
purchasers  of  personal  property,  bought  without  notice  of  any  oppos- 
ing claim,  and  those  of  the  original  owner  divested  of  the  possession 
or  the  control  of  his  property  by  accident,  mistake,  fraud  or  mis- 
placed contidence.  The  original  owner  now  claims  his  lead  against 
purchasers  who  bought  for  a  fair  price,  in  the  usual  course  of  trade, 
from  persons  holding  the  usual  evidence  of  such  property  (a  bill  of 
lading  indorsed  to  them),  and  in  actual  possession  of  the  goods. 
Of  these  two  innocent  parties,  which  of  the  two  is  to  bear  the  loss 
arising  from  the  wrong-doing  of  the  third? 

The  universal  and  fundamental  principle  of  our  law  of  personal 
property  is  that  no  man  can  be  divested  of  his  property  without  his 
own  consent ;  and,  consequently,  that  even  the  honest  purchaser  under 
a  defective  title  cannot  hold  against  the  true  proprietor.  That  "no 
one  can  transfer  to  another  a  better  title  than  he  has  himself,"  is  a 
maxim,  says  Chancellor  Kent,  "alike  of  the  common  and  the  civil  law, 
and  a  sale  imports  nothing  more  than  [that]  the  bona  fide  purchaser 
succeeds  to  the  rights  of  the  vendor."  The  only  exception  to  this  rule 
in  the  ancient  English  jurisprudence  was  that  of  sales  in  markets  overt, 
a  custom  which  has  not  been  introduced  among  us.  It  has  been 
frequently  held  in  this  country  that  the  English  law  of  markets  overt 
has  not  been  adopted,  and  consequently,  as  a  general  rule,  the  title 
of  the  true  owner  cannot  be  lost  without  his  consent. 

To  whatever  and  however  numerous  exceptions  this  rule  of  our 
law  may  be  subject,  it  is  unquestionably  the  general  and  regulating 
princij)le,  modified  only  by  the  absolute  necessity  or  the  obvious  policy 
of  human  affairs.  I  have  stated  the  general  and  governing  law; 
let  us  now  see  what  are  precisely  the  exceptions  to  it. 

Setting  wholly  aside,  then,  this  part  of  the  law  as  to  cash,  bank 
notes,  and  bills  to  bearer,  as  founded  on  the  peculiar  necessities  of 
currency  and  trade,  and  regulated  by  decisions  and  usages  peculiar 
to  itself,  what  rules  do  we  find  to  obtain  in  other  instances  of  conflict 
i;etween  the  rights  of  original  owners  and  those  of  fair  purchasers? 
After  a  careful  examination  of  all  the  English  cases  and  those  of 
this  state  that  have  been  cited  or  referred  to,  I  come  to  this  general 
conclusion:    that   the   title   of   property   in   things   movable   can  pass 


SALES  351 

from  the  owner  only  by  his  own  consent  and  voluntary  act,  or  by 
operation  of  law;  but  that  the  honest  purchaser  who  buys  for  a 
valuable  consideration  in  the  course  of  trade,  without  notice  of  any 
adverse  claim,  or  any  circumstances  which  might  lead  a  prudent  man 
to  suspect  such  adverse  claim,  will  be  protected  in  his  title  against 
the  original  owner  in  those  cases,  and  in  those  only,  where  such  owner 
has,  by  his  own  direct  voluntary  act,  conferred  upon  the  person  from 
whom  the  bona  fide  vendee  derives  title,  the  apparent  right  of  property 
as  owner,  or  of  disposal  as  an  agent.  I  find  two  distinct  classes  of 
cases  under  this  head,  and  no  more. 

I.  The  first  is,  when  the  owner  with  the  intention  of  sale,  has  in 
any  way  parted  with  the  actual  property  of  his  goods,  with  his  own 
consent,  though  under  such  circumstances  of  fraud  or  error,  as  would 
make  that  consent  revocable,  rescind  the  sale,  and  authorize  the  re- 
covery of  the  goods  as  against  such  vendee.  But  if  the  property 
passes  into  the  hands  of  honest  purchasers,  the  first  owner  must  bear 
the  loss.  Thus,  to  take  an  instance  from  our  own  reports,  where 
goods  were  obtained  by  a  sale  on  credit,  under  a  forged  recom- 
mendation and  guaranty,  and  then  sold  to  a  bona  fide  purchaser  in 
the  customary  course  of  trade,  the  second  buyer  was  protected  in  his 
possession  against  the  defrauded  original  owner.  So,  again,  where 
the  owner  gave  possession  and  the  apparent  title  of  property  to  a 
purchaser  who  gave  his  worthless  note,  in  fraudulent  contemplation 
of  immediate  bankruptcy,  a  fair  purchase  from  the  fraudulent  vendee 
was  held  to  be  good  against  the  first  owner.  In  all  such  cases,  to 
protect  the  new  purchaser,  there  must  be  a  full  consent  of  the  owner 
to  the  transfer  of  property,  though  such  consent  might  be  temporary 
only,  obtained  by  fraud  or  mistake,  and  therefore  revocable  against 
such  unfair  first  purchaser. 

II.  The  other  class  of  cases  in  which  the  owner  loses  the  right  of 
following  and  reclaiming  his  property  is  where  he  has,  by  his  own 
voluntary  act  or  consent,  given  to  another  such  evidence  of  the  right 
of  selling  his  goods  as,  according  to  the  custom  of  trade,  or  the  com- 
mon understanding  of  the  world,  usually  accompanies  the  authority  or 
disposal;  or,  to  use  the  language  of  Lord  Ellenborough,  when  the 
owner  "has  given  the  external  indicia  of  the  right  of  disposing  of 
his  property."  Here  it  is  well  settled  that,  however  the  possessor 
of  such  external  indicia  may  abuse  the  confidence  of  his  principal, 
a  sale  to  a  fair  purchaser  divests  the  first  title,  and  the  authority  to 
sell  so  conferred,  whether  real  or  apparent,  is  good  against  him  who 
gave  it. 

Again,  the  owner  may  lose  the  right  of  recovering  his  goods 
against  purchasers,  by  exhibiting  to  the  world  a  third  person  as 
having  power  to  sell  and  dispose  of  them;  and  this,  not  only  by 
giving  a  direct  authority  to  him,  but  by  conferring  an  implied 
authority.  Such  an  authority  may  be  implied  by  the  assent  to  and 
jatification  of  prior  similar  dealings,  so  as  to  hold  such  person  out 
to  those  with  whom  he  is  in  the  habit  of  trading  as  authorized  to 
buy  or  sell.  It  may  be  inferred  from  the  nature  of  the  business  of 
the  agent,  with  fit  accompanying  circumstances. 


352  COMMERCIAL    LAW    CASES 

Beyond  the  precise  exceptions  I  have  above  stated,  I  think  our 
law  has  not  carried  the  protection  of  the  fair  vendee  against  the 
aefrauded  or  unfortunate  owner.  It  protects  him  when  the  owner's 
misplaced  confidence  has  voluntarily  given  to  another  the  apparent 
right  of  property  or  of  sale.  But  if  the  owner  loses  his  property, 
or  is  robbed  of  it,  or  it  is  sold  or  pledged  without  his  consent  by  one 
who  has  only  a  temporary  right  to  its  use  by  hiring,  or  otherwise, 
or  a  qualified  possession  of  it  for  a  specific  purpose,  as  for  trans- 
portation, or  for  work  to  be  performed  on  it,  the  owner  can  follow 
and  reclaim  it  in  the  hands  of  any  person,  however  innocent. 

2.    Further  Discussion  of  General  Rule. 

Barnard  v.  Campbell,  j^  N.  Y.  456. 

On  August  21,  Campbell's  firm  purchased  of  Jeffries  a  quantity 
of  linseed,  for  which  it  paid.  Jeffries,  at  the  time,  did  not  have 
the  Unseed.  On  August  24,  he  purchased  of  the  plaintiffs,  and 
by  fraud  induced  the  delivery  of,  1,370  bags  of  Hnseed  which  he 
delivered  to  Campbell  in  fulfilment  of  his  contract  of  sale.  The 
plaintiffs  seek  to  recover  possession,  Jeffries  having  failed  on 
the  27th. 

Held,  that  a  purchaser  takes  only  such  title  as  his  vendor  had. 

Allen,  J. 

That  the  defendants  were  purchasers  in  good  faith,  that  is, 
without  notice  or  knowledge  of  the  fraud  of  JefTries,  or  of  the  defects 
in  his  title,  for  a  full  consideration  actually  paid  to  JefTries,  is  not 
disputed.  Both  plaintiiTs  and  defendants  are  alike  innocent  of  any 
dishonest  or  fraudulent  intent,  and  one  or  the  other  must  suffer  loss 
by  the  frauds  of  one  with  whom  they  dealt  in  good  faith,  for  legiti- 
mate purposes,  and  with  honest  intention.  Both  were  alike  the  vic- 
tims of  the  same  fraudulent  actor,  and  if  one  rather  than  the  other  of 
the  parties  has  done  any  act  enabling  the  fraud  to  be  committed,  and 
without  which  it  could  not  have  been  perpetrated  upon  the  other  in 
ihe  exercise  of  ordinary  care  and  discretion,  the  loss  should  fall  on 
that  one  of  the  parties  aiding  and  abetting  the  fraud,  or  enabling 
it  to  be  committed.  But  good  faitli,  and  a  parting  of  value  by  the 
one,  will  not  alone  determine  who  should  have  the  loss,  or  fix  the 
ownership  of  the  property  fraudulently  purchased  from  the  one  and 
sold  to  the  other.  The  general  rule  is  that  a  purchaser  of  property 
lakes  only  such  title  as  his  seller  has,  and  is  authorized  to  transfer; 
that  he  acquires  precisely  the  interest  which  the  seller  owns,  and  no 
other  or  greater.  The  general  rule  of  law  is  undoubted  that  no  one 
can  transfer  a  better  title  than  he  himself  possesses.  To  this  rule 
there  are,  however,  some  exceptions,  and  unless  the  defendants  are 
within  the  exceptions,  they  must  abide  by  the  title  of  Jeilries. 

One   of   the   recognized  exceptions   applies  to  negotiable   instru- 


SALES  353 

merits  only,  and  depends  for  its  existence  upon  the  law  merchant  and 
the  reasons  of  public  policy  upon  which  that  branch  of  the  law  rests. 
To  make  this  exception  available,  the  negotiable  paper  must  be 
actually  transferred  by  indorsement  in  the  usual  form  and  for  value. 
Another  exception  is  in  the  case  of  a  transfer  by  indorsement  and 
delivery  of  a  bill  of  lading,  which  is  the  symbol  of  the  property 
itself,  to  a  bona  fide  purchaser  for  value,  by  a  consignee  to  whom 
the  consignor  and  original  owner  of  the  goods  has  indorsed  and 
delivered  it.  This  exception  is  founded  on  the  nature  of  the  instru- 
ment, and  the  necessities  of  commerce.  The  bill  of  lading,  for  the 
convenience  of  trade,  has  been  allowed  to  have  effect  at  variance 
with  the  general  rule  of  law.  But  this  operation  of  a  bill  of  lading 
is  confined  to  a  case  where  the  person  who  transfers  the  right  is 
himself  in  possession  of  the  bill  of  lading  so  as  to  be  in  a  situation 
to  transfer  the  instrument  itself,  the  symbol  of  the  property  trans- 
ferred. 

Bills  of  lading  differ  essentially  from  bills  of  exchange  and  other 
commercial  negotiable  instruments;  and,  even  possession  of  a  bill  of 
lading,  without  the  authority  of  the  owner  and  vendor  of  the  goods, 
or  when  obtained  by  fraud,  will  not  authorize  a  transfer  so  as  to 
defeat  the  title  of  the  original  owner,  or  affect  his  right  to  rescind 
the  sale  and  stop  the  goods  in  transit.  While  possession  of  a  bill 
of  lading,  or  other  document  of  like  nature,  may  be  evidence  of  title, 
and  in  some  circumstances  and  for  some  purposes  equivalent  to 
actual  possession  of  the  goods,  it  does  not  constitute  title,  nor  of 
itself  affect  the  operation  of  the  general  rule  that  property  in  chattels 
cannot  be  transferred  except  by  one  having  the  title  or  an  authority 
from  the  true  owner.  Jeffries  had  no  bill  of  lading  from  the  plaintiff's, 
the  vendors  of  the  goods,  or  any  document  of  like  character  trans- 
ferable in  the  usual  course  of  business,  and  the  transfer  and  delivery 
of  which  to  a  purchaser  for  value  would  have  operated  as  a  symbolical 
delivery  of  the  goods,  and  been  the  equivalent  of  an  actual  delivery, 
so  as  to  terminate  the  right  of  the  plaintiff's  to  rescind  the  sale  and 
reclaim  the  goods. 

Another  exception  to  the  general  rule  exists  in  the  case  of  a  sale 
in  market  overt ;  but  as  we  have  no  markets  overt,  and  there  are  no 
sales,  public  or  private,  known  to  our  law,  which  relieve  the  buyer 
of  merchandise  from  the  rule  of  caveat  eviptor,  as  applied  to  the  title, 
this  exception  need  not  be  further  considered. 

The  defendants  can  only  resist  the  claim  of  the  plaintiffs  to  the 
merchandise  by  establishing  an  equitable  estoppel,  founded  upon  the 
acts  of  the  plaintiff's,  and  in  the  application  of  the  rule  applied  by  the 
judge  at  the  circuit,  by  which,  as  between  two  persons  equally  innocent, 
a  loss  resulting  from  the  fraudulent  acts  of  another  shall  rest  upon 
him  by  whose  act  or  omission  the  fraud  has  been  made  possible. 
This  rule,  general  in  its  terms,  only  operates  to  protect  those  who, 
in  dealing  with  others,  exercise  ordinary  caution  and  prudence,  and 
who  deal  in  the  ordinary  way  and  in  the  usual  course  of  business 
and  upon  the  ordinary  evidences  of  right  and  authority  in  those  with 


354  COMMERCIAL    LAW    CASES 

whom  they  deal,  and  as  against  those  who  have  voluntarily  conferred 
upon  others  the  usual  evidences  or  indicia  of  ownership  of  property, 
or  an  apparent  authority  to  deal  with  and  dispose  of  it.  In  such  case, 
for  obvious  reasons,  the  law  raises  an  equitable  estoppel,  and,  as 
against  the  real  owner,  declares  that  the  apparent  title  and  authority 
which  exists  by  his  act  or  omission  shall  quoad  persons  acting  and 
parting  with  value  upon  the  faith  of  it,  stand  for  and  be  regarded 
as  the  real  title  and  authority.  It  is  not  every  parting  with  the 
possession  of  chattels  or  the  documentary  evidence  of  title  that  will 
enable  the  possessor  to  make  a  good  title  to  one  who  may  purchase 
from  him.  So  far  as  such  a  parting  with  the  possession  is  necessary 
in  the  business  of  life,  or  authorized  by  the  custom  of  trade,  the 
owner  of  the  goods  will  not  be  affected  by  a  sale  by  the  one  having 
the  custody  and  manual  possession.  But  the  owner  must  go  further, 
and  do  some  act  of  a  nature  to  mislead  third  persons  as  to  the  true 
position  of  the  title. 

Two  things  must  concur  to  create  an  estoppel  by  which  an  owner 
may  be  deprived  of  his  property,  by  the  act  of  a  third  person,  without 
his  assent,  under  the  rule  now  considered:  i.  The  owner  must  clothe 
the  person  assuming  to  dispose  of  the  property  with  the  apparent  title 
to,  or  authority  to  dispose  of,  it ;  and,  2,  the  person  alleging  the  estoppel 
must  have  acted  and  parted  with  value  upon  the  faith  of  such  apparent 
ownership  or  authority,  so  that  he  will  be  the  loser  if  the  appearances 
to  which  he  trusted  are  not  real.  In  this  respect  it  does  not  differ 
from  other  estoppels  in  pais. 

In  the  case  before  us  every  element  of  an  estoppel  is  wanting, 
and  no  case  was  made  for  the  application  of  the  rule  by  which,  under 
some  circumstances,  one,  rather  than  the  other  of  two  innocent  per- 
sons, is  made  to  bear  the  loss  occasioned  by  the  fraud  of  a  third 
person.* 

3.     Who  are  Bona  Fide  Purchasers. 

Hayden  v.  Charter  Oak  Driving  Park.  (5j  Conn.  142. 

This  was  an  action  to  compel  the  defendant  to  issue  a  certifi- 
cate for  stock.  Harbison  had  a  certificate  for  41  shares  of  stock 
of  the  defendant  corporation  which  had  been  isstied  to  him  by  mis- 
take. He,  however,  believed  that  he  was  the  owner  of  that 
amount  of  stock,  and  agreed  to  assign  25  shares  to  Hayden  in 
settlement  of  a  previous  indebtedness  which  was  not  in  fact 
discharged.  Upon  Hayden's  application  for  a  new  certificate,  it 
transpired  that  Harbison  was  entitled  to  a  smaller  number  of 
shares  than  the  amoimt  transferred  to  Hayden,  who  seeks  to 
compel  the  issue  of  25  shares. 

Held,  that  until  payment  of  consideration,  a  person  cannot 
become  a  jjurcbaser  for  value. 

"  The  authors  consider  that  thr  application  of  the  law  to  the  reported  facts 
of  the  case  is  unconvincing.  It  is  probable  that  the  statement  of  facts  in  the  report 
is  incomplete.     Sec  Simpson   v.   Del   lloyo,  infra. 


SALES  355 

Torrance,  J. 

The  important  question  remains — was  the  plaintiff  a  bona  fide 
purchaser  for  value?  If  he  was  not,  he  stands  in  no  better  position 
than  Harbison,  and  as  against  him  we  think  the  defendant  would 
not  be  estopped  to  set  up  this  mistake. 

It  is  perhaps,  for  the  purposes  of  this  case,  sufficiently  accurate 
to  say  that  a  bona  fide  purchaser  is  one  who  has  bought  property 
without  notice  of  the  claims  of  third  parties  thereto,  upon  the  faith 
that  no  such  claims  exist,  and  who  has  therefore  actually  paid  or 
parted  with  some  valuable  consideration  or  has  in  some  way  altered 
his  legal  condition  for  the  worse.  It  is  not  enough  that  he  has  agreed 
to  pay  a  valuable  consideration  before  notice ;  he  must  have  actually 
paid  or  parted  with  it  before  notice.  "Notice  received  before  the 
party  has  actually  paid  the  money  or  parted  with  the  other  valuable 
consideration,  is  a  valid  and  binding  notice,  and  subjects  his  interest 
to  the  prior  equity  of  which  he  is  notified ;  and  this  is  true  even  though 
he  has  already  taken  a  conveyance  of  the  legal  title  and  has  given 
security  for  the  purchase  price,  even  by  an  instrument  under  seal. 
The  reason  is  that  the  conveyance  of  the  legal  estate  is  under  such 
circumstances  a  voluntary  one,  because  the  agreement  to  pay  the 
price  and  the  security  given  therefor  are  in  reality  mere  nullities. 
Not  only  must  there  be  a  valuable  consideration  in  fact,  but  it  must 
be  paid  before  notice  of  the  prior  claim.  Notice  after  the  agreement 
for  purchase  is  made,  but  before  any  payment,  will  destroy  the 
character  of  the  bona  fide  purchase.  It  is  further  settled  that  there 
must  be  actual  payment  before  any  notice,  or  what  in  law  is  tantamount 
to  payment — a  transfer  of  property  or  things  in  action,  or  an  absolute 
change  of  the  purchaser's  legal  position  for  the  worse,  or  the  assump- 
tion by  him  of  some  new  irrevocable  legal  obligation.  It  follows, 
therefore,  that  his  new  promise,  contract,  bond,  covenant,  bond  and 
mortgage,  or  other  non-negotiable  security  for  the  price,  will  not 
render  the  party  a  bona  fide  purchaser,  nor  entitle  him  to  protection; 
for  upon  failure  of  the  consideration  he  can  be  relieved  from  such 
obligations  in  equity  if  not  at  law." 

Applying  these  principles  to  the  case  at  bar,  we  think  it  is  quite 
clear  that  the  plaintiff,  before  he  paid  or  parted  with  any  valuable 
consideration  to  Harbison  or  had  changed  his  position  in  any  way 
for  the  worse,  had  ample  notice  of  the  claims  of  the  defendant,  and 
was  therefore  not  a  bona  fide  purchaser. 

4.     Estoppel  to  Assert  Title. 

Pickering  v.  Busk.   75  East   (Eng.)   j8. 

Swallow,  a  hemp  broker,  purchased  for  Pickering  hemp  then 
lying  at  a  certain  wharf.  The  hemp  was  delivered  to  Swallow 
at  the  desire  of  Pickering  and  Swallow  had  it  transferred  to  his 
name  by  the  warehouseman.  Later,  Swallow  sold  the  hemp  to 
Hayward    and    Company,     who    thereafter    became    bankrupt. 


35^  COMMERCIAL   LAW    CASES 

Pickering  sues  Busk,  the  assignee  of  Hayward  and  Company,  to 
establish  his  title. 

Held,  that  by  his  act  the  plaintiff  is  estopped  from  denying  the 
authority  of  the  broker  to  sell  it. 

Lord  Ellcnhorough,  C.  J. 

It  cannot  fairly  be  questioned  :n  this  case  but  that  Swallow  had 
an  implied  authority  to  sell.  Strangers  can  only  look  to  the  acts  of 
the  parties,  and  to  the  external  indicia  of  property,  and  not  to  the 
private  communications  which  may  pass  between  a  principal  and  his 
broker;  and  if  a  person  authorize  another  to  assume  the  apparent 
right  of  disposing  of  property  in  the  ordinary  course  of  trade,  it 
must  be  presumed  that  the  apparent  authority  is  the  real  authority. 
I  cannot  subscribe  to  the  doctrine  that  a  broker's  engagements  are 
necessarily  and  in  all  cases  limited  to  his  actual  authority,  the  reality 
of  which  is  afterwards  to  be  tried  by  the  fact.  It  is  clear  that  he 
may  bind  his  principal  within  the  limits  of  the  authority  with  which 
he  has  been  apparently  clothed  by  the  principal  in  respect  of  the 
subject  matter;  and  there  would  be  no  safety  in  mercantile  trans- 
actions if  he  could  not.  If  the  principal  send  his  commodity  to  a 
place,  where  it  is  the  ordinary  business  of  the  person  to  whom  it  is 
confided  to  sell,  it  must  be  intended  that  the  commodity  was  sent 
thither  for  the  purpose  of  sale.  If  the  owner  of  a  horse  send  it  to 
a  repository  of  sale,  can  it  be  implied  that  he  sent  it  thither  for 
any  other  purpose  than  that  of  sale  ?  Of  if  one  sends  goods  to  an 
auction-room,  can  it  be  supposed  that  he  sent  them  thither  merely 
for  safe  custody?  Where  the  commodity  is  sent  in  such  a  way,  and 
to  such  a  place,  as  to  exhibit  an  apparent  purpose  of  sale,  the  principal 
will  be  bound,  and  the  purchaser  safe. 

5.    What  Raises  Estoppel. 

Johnson  v.  The  Credit  Lyonnais  Co.   L.  R.  j  C.  P.  D.  (Eng.) 

32. 

Hoffman,  a  tobacco  broker,  had  50  hogshead  of  tobacco  lying 
in  bond  in  his  name  in  the  warehouse  of  a  dock  company,  which 
had  issued  the  warrants  to  him.  Johnson  bought  the  tobacco 
from  Hoffman  and  paid  for  it,  but  left  the  warrants  in  his  pos- 
session without  making  any  change  on  the  books  of  the  dock 
company.  Hoffman  fraudulently  pledged  part  of  this  tobacco 
with  the  Credit  Company  to  secure  a  loan,  and  gave  them  the 
dock  warrants  as  security.  Johnson  sues  to  recover  the  value 
of  the  tobacco. 

Held,  that  Hoffman  did  not  have  such  ostensible  authority  to 
sell  the  goods  that  the  plaintiff  was  estopped  to  set  up  his  claim. 

Cockburn,  C.  J. 

The  case   for  the   plaintiff   rests   on  the   general   proposition   of 
law — wliicb   as  a  general   proposition   camiot   be   contested — that  tbe 


SALES  357 

mere  possession  of  the  property  of  another,  without  authority  to  deal 
with  the  thing  in  question  otherwise  than  for  the  purpose  of  safe 
custody,  as  was  the  case  here,  will  not,  if  the  person  so  in  possession 
takes  upon  himself  to  sell  or  pledge  to  a  third  part}',  divest  the  owner 
of  his  rights  as  against  the  third  party,  however  innocent  in  the  trans- 
action the  latter  party  may  have  been. 

The  defendants,  on  the  other  hand,  insisted  on  two  grounds  as 
taking  the  case  out  of  the  general  rule :  first,  that  the  plaintiff,  by 
leaving  the  possession  of  the  goods  and  indicia  of  property  in  the 
hands  of  Hoffman,  had  enabled  the  latter  to  pledge  the  goods  to  them, 
and  was  therefore  estopped  from  denying  the  right  of  Hoffman  so 
to  deal  with  them;  secondly,  that,  even  if  the  property  in  the  tobacco 
still  remained  in  the  plaintiff,  so  as  to  entitle  him  to  recover  its  value, 
on  the  other  hand,  the  plaintiff  had  in  the  conduct  in  question  been 
guilty  of  negligence  by  which  the  defendants  had  been  induced  to 
deal  with  Hoffman  as  the  owner  of  the  tobacco,  and  to  pay  him  for 
it;  by  reason  of  which  they  were  entitled  to  recover  back  the  amount 
by  way  of  counterclaim,  or  what  would  come  to  the  same  thing,  to 
set  it  off  in  the  present  action. 

Sitting  here  in  a  Court  of  Appeal,  I  feel  myself  at  liberty  to  say 
that  [the]  authorities  fail  to  satisfy  me  that  at  common  law  the 
leaving  by  a  vendee  [of]  goods  bought,  or  the  documents  of  title, 
in  the  hands  of  the  vendor  till  it  suited  the  convenience  of  the  former 
to  take  possession  of  them,  would,  on  a  fraudulent  sale  or  pledge  by 
the  party  so  possessed,  divest  the  owner  of  his  property,  or  estop  him 
from  asserting  his  right  to  it.  If  this  had  been  so,  there  would  have 
been,  as  it  seems  to  me,  no  necessity  for  giving  effect  by  statute  to 
the  unauthorized  sale  of  goods  by  a  factor. 

The  defense,  founded  on  the  allegation  of  negligence,  remains 
to  be  considered. 

That  the  plaintiff,  in  omitting  to  have  the  goods  transferred  to 
his  own  name,  and  to  have  the  dock  warrants  delivered  over  to  him, 
was  wanting  in  common  prudence,  in  other  words,  was  guilty  of 
negligence,  I  cannot  bring  myself  to  doubt,  and  I  am  strongly  con- 
firmed in  this  view  by  the  passing  of  the  recent  statute,  as  the  legis- 
lature must  have  proceeded  on  the  view  that  there  is  default  in  the 
owner  in  such  a  case. 

But  whether  this  negligence  of  the  plaintiff  will,  under  the  cir- 
cumstances, give  to  the  defendants  any  ground  of  complaint  which 
can  be  enforced  in  point  of  law  is  a  very  different  question.  Negli- 
gence, to  afford  a  ground  of  action  to  one  who  has  suffered  from  it, 
must  have  reference  to  some  duty  which  the  party  guilty  of  the 
negligence  owed  to  him.  Negligence,  to  have  the  effect  of  estopping 
the  party,  must  be  the  neglect  of  some  duty  cast  upon  the  person 
guilty  of  it.  This,  I  apprehend,  is  a  true  and  sound  principle.  A 
person  who  does  not  lock  up  his  goods,  which  are  consequently  stolen, 
may  be  said  to  be  negligent  as  regards  himself;  but,  inasmuch  as 
he  neglects  no  duty  which  the  law  casts  upon  him,  he  is  not  in 
consequence  estopped  from  denying  the  title  of  whose  who  may  have, 


358  COMMERCIAL   LAW    CASES 

however  innocently,  purchased  those  goods  from  the  thief,  except 
in  market  overt.  The  same  principle  would  obviously  apply  to  the 
case  of  goods  fraudulently  sold  or  pledged  by  a  person  left  in  pos- 
session of  them.  The  rule  thus  laid  down  is  applicable  here.  The 
plaintiff  may  have  been  negligent,  and  his  negligence  may  have 
brought  on  the  defendants  the  loss  of  the  money  they  have  advanced. 
But  the  plaintiff  owed  no  duty  to  the  defendants — at  least  no  duty 
which  the  law  can  recognize — either  as  individuals  or  as  members 
of  the  general  public. 

This  being  so,  I  am  of  opinion  that  the  negligence  of  the  plaintiff 
neither  estops  him  from  claiming  the  goods  in  question  from  the 
defendants,  nor  gives  the  latter  a  counter  claim  for  the  money  which 
they  have  advanced  to  Hoffman  on  the  security  of  the  goods. 

6.     Sale  by  Thief. 

Farquharson  Brothers  &  Co.  v.  King  &  Co.  (ip02)  A.  C. 
(Eng.)  325. 

Farquharson  Brothers  gave  Capon  authority  to  sign  delivery 
orders  in  their  behalf.  Capon  fraudulently  shipped  lumber  on 
such  delivery  orders  to  himself  as  Brown,  and  posing  as  Brown 
sold  the  lumber  to  King  and  Company,  who  bought  and  paid  for 
it  in  good  faith.     Farquharson  Brothers  sue  to  recover  its  value. 

Held,  that  no  title  passes  under  a  sale  by  a  thief. 

Lord  Macnaghten. 

The  real  defense  is  a  singular  one.  It  comes  to  this :  The  de- 
fendants say  to  the  plaintiffs,  "You,  Messrs.  Farquharson,  have  con- 
ducted your  business  in  such  an  unbusinesslike  way  that  you  ought  not 
to  have  your  own  goods  back  again.  This  misfortune  common  to  you 
and  to  us  all  is  all  your  fault.  By  your  foolish  confidence  in  Capon, 
and  by  the  written  authority  you  gave  him,  you  'enabled'  him  to 
commit  this  fraud  upon  us.  And  so  Ashhurst  J.'s  famous  dictum 
comes  in  and  you  must  sustain  the  loss." 

The  defense,  in  my  opinion,  has  no  foundation  in  principle  or 
authority.  To  try  the  principle,  take  a  common  case — a  case  which 
everybody  understands.  Nothing  is  better  settled  than  this,  that  if 
a  person  buys  a  chattel  and  it  turns  out  that  the  chattel  was  found 
by  the  person  who  professed  to  sell  it,  the  true  owner  can  recover 
his  property,  unless  there  has  been  a  sale  in  market  overt.  The 
right  of  the  true  owner  is  not  prejudiced  or  affected  by  his  careless- 
ness in  losing  the  chattel,  however  gross  it  may  have  been.  If  I  lose 
a  valuable  dog  and  find  it  afterwards  in  the  possession  of  a  gentleman 
who  bought  it  from  somebody  wlioin  he  believed  to  be  the  ov.ner,  it 
is  no  answer  to  me  to  say  that  he  never  would  have  been  cheated 
into  buying  the  dog  if  I  had  chained  it  up  or  put  a  collar  on  it  or 
kept  it  under  proper  control.     If  a  person  leaves  a  watch  or  a  ring 


SALES  359 

on  a  seat  in  the  park  or  on  a  table  at  a  cafe  and  it  ultimately  gets  into 
the  hands  of  a  bona  fide  purchaser,  it  is  no  answer  to  the  true  owner 
to  say  that  it  was  his  carelessness  and  nothing  else  that  enabled  the 
finder  to  pass  it  off  as  his  own.  If  that  be  so,  how  can  carelessness, 
however  extreme,  in  the  conduct  of  a  man's  own  business,  preclude 
him  from  recovering  his  own  property  which  has  been  stolen  from 
him? 


7.     Sale  by  Fraudulent  Vendee. 

Simpson  v.  Del  Hoyo.   P4  N.  Y.  i8q. 

Mrs.  Del  Hoyo  was  induced  by  fraudulent  representations  of 
Lowenstein  to  convey  real  estate  to  his  daughter,  who  gave  him 
a  mortgage  on  it.  This  mortgage  Lowenstein  assigned  for  valu- 
able consideration  to  Simpson,  who  acted  in  good  faith.  Mrs. 
Del  Hoyo  secured  the  property  again  from  Miss  Lowenstein  and 
now  seeks  to  defend  the  foreclosure  of  the  mortgage  on  the  ground 
that  the  fraud  perpetrated  upon  her  made  the  mortgage  invalid. 

Held,  that  when  title  to  property  has  been  acquired  by  fraud, 
the  fraudulent  vendee  may  pass  a  good  title  to  a  bona  fide  pur- 
chaser. 

Earl,  J. 

When  real  or  personal  property  is  obtained  from  one  by  fraud 
upon  the  purchase  thereof,  and  the  vendor  thus  intentionally  parts 
with  the  title,  the  vendee  can  always,  by  a  sale  to  a  bona  fide  pur- 
chaser for  value,  give  a  title  good  as  against  the  vendor.  If  Miss 
Lowenstein  could  give  a  conveyance,  good  as  against  her  grantor, 
she  could  execute  a  mortgage  to  one  parting  with  value,  and  taking 
it  in  good  faith,  which  would  be  equally  effectual,  as  she  could  have 
done  if  the  property  had  been  personal  instead  of  real.  So  if  this 
mortgage  to  her  father  had  been  taken  by  him  for  value,  and  in  good 
faith,  he  could  have  enforced  the  same  against  the  land. 

The  assignee  of  the  mortgage  holds  under  Miss  Lowenstein. 
He  took  it  on  the  faith  that  she,  as  the  apparent  owner  of  the  real 
estate,  had  the  right  to  execute  it.  When  he  took  it  he  could  inquire 
of  her  whether  it  was  valid  and  effectual,  she  at  the  time  having  the 
legal  title  to  the  land;  and  when  his  inquiries  had  extended  thus  far 
he  was  bound  to  go  no  further. 

It  would  lead  to  great  inconvenience  and  great  insecurity,  if 
persons  taking  or  purchasing  mortgages  were  obliged  to  go  back  of 
the  mortgagor  who  owned  the  land  and  had  the  record  title  thereto, 
and  at  their  peril  ascertain  whether  any  fraud  had  been  perpetrated 
upon  some  prior  owner  of  the  land. 

It  is  a  familiar  rule  of  law  that  a  fraudulent  purchaser  of  real 
or  personal  property  obtains  the  legal  title  to  the  property  purchased, 


360  COMMERCIAL    LAW    CASES 

and  that  he  may  convey  a  good  title  to  any  bona  fide  purchaser  from 
him  for  value.  He  may  not  only  convey  the  property,  but  he  may 
deal  with  it  as  owner,  and  may  mortgage  it ;  and  whoever  purchases 
the  property  or  takes  a  mortgage  thereon  from  him  or  under  him, 
in  good  faith,  for  value,  or  deals  with  him  in  good  faith  in  reference 
thereto,  will  be  protected  against  the  claims  of  the  defrauded  vendor. 
The  real  estate  may  be  conveyed,  or  a  mortgage  thereon  may  be 
assigned  to  several  successive  participants  in  the  fraud,  or  several 
successive  mala  fide  purchasers.  But  the  moment  real  estate  or  the 
mortgage  reaches  the  hands  of  a  bona  fide  purchaser  for  value,  the 
rights  and  equities  of  the  defrauded  owner  are  cut  off. 


D.     Rules  Concerning  Passiiig  of  Title  Under  Sales  Act. 
I.     General  Rules. 

Massachusetts  Acts  and  Resolves,  IQ08.    Chapter  2^7. 

Section  19.  Unless  a  difTerent  intention  appears,  the  follow- 
ing are  rules  for  ascertaining  the  intention  of  the  parties  as  to 
the  time  at  which  the  property  in  the  goods  is  to  pass  to  the 
buyer : 

Rule  I.  Where  there  is  an  unconditional  contract  to  sell 
specific  goods,  in  a  deliverable  state,  the  property  in  the  goods 
passes  to  the  buyer  when  the  contract  is  made,  and  it  is  immate- 
rial whether  the  time  of  payment,  or  the  time  of  delivery,  or  both, 
be  postponed. 

Rule  2.  Where  there  is  a  contract  to  sell  specific  goods  and 
the  seller  is  bound  to  do  something  to  the  goods  for  the  purpose 
of  putting  them  into  a  deliverable  state,  the  property  does  not 
pass  until  such  thing  be  done. 

Rule  3.  ( I )  When  goods  are  delivered  to  the  buyer  "on  sale 
or  return,"  or  on  other  terms  indicating  an  intention  to  make  a 
present  sale  but  to  give  the  buyer  an  option  to  return  the  goods 
instead  of  paying  the  price,  the  property  passes  to  the  buyer  on 
delivery,  but  he  may  revest  the  property  in  the  seller  by  returning 
or  tendering  the  goods  within  the  time  fixed  in  the  contract,  or  if  no 
time  has  been  fixed,  within  a  reasonable  time. 

(2)  When  goods  are  delivered  to  the  buyer  on  approval  or  on 
trial  or  on  satisfaction,  or  other  similar  terms,  the  property 
therein  passes  to  the  buyer : 

(a)  When  be  signifies  bis  approval  or  acceptance  to  the  seller 
or  does  any  other  act  adopting  the  transaction. 

(b)  If  he  does  not  signify  his  approval  or  acceptance  to  the 


SALES  361 

seller,  but  retains  the  goods  without  giving  notice  of  rejection, 
then,  if  a  time  has  been  fixed  for  the  return  of  the  goods,  on  the 
expiration  of  such  time,  and,  if  no  time  has  been  fixed,  on  the 
expiration  of  a  reasonable  time.  What  is  a  reasonable  time  is  a 
question  of  fact. 

Rule  4.  (i)  Where  there  is  a  contract  to  sell  unascertained 
or  future  goods  by  description,  and  goods  of  that  description  and 
in  a  deliverable  state  are  unconditionally  appropriated  to  the  con- 
tract, either  by  the  seller  with  the  assent  of  the  buyer,  or  by  the 
buyer  with  the  assent  of  the  seller,  the  property  in  the  goods  there- 
upon passes  to  the  buyer.  Such  assent  may  be  expressed  or 
implied,  and  may  be  given  either  before  or  after  the  appropriation 
is  made. 

(2)  Where,  in  pursuance  of  a  contract  to  sell,  the  seller  de- 
livers the  goods  to  the  buyer,  or  to  a  carrier  or  other  bailee, 
whether  named  by  the  buyer  or  not,  f®r  the  purpose  of  transmis- 
sion to  or  holding  for  the  buyer,  he  is  presumed  to  have  uncondi- 
tionally appropriated  the  goods  to  the  contract,  except  in  the 
cases  provided  for  in  the  next  rule  and  in  section  twenty.  This 
presumption  is  applicable,  although  by  the  terms  of  the  contract, 
the  buyer  is  to  pay  the  price  before  receiving  delivery  of  the  goods, 
and  the  goods  are  marked  with  the  words  "collect  on  delivery" 
or  their  equivalents. 

Rule  5.  If  a  contract  to  sell  requires  the  seller  to  deliver  the 
goods  to  the  buyer,  or  at  a  particular  place,  or  to  pay  the  freight 
or  cost  of  transportation  to  the  buyer,  or  to  a  particular  place,  the 
property  does  not  pass  until  the  goods  have  been  delivered  to  the 
buyer  or  have  reached  the  place  agreed  upon. 

2.     Effect  of  Bill  of  Lading. 

Massachusetts  Acts  and  Resolves,  ipoS.   Chapter  -??/, 

Section  20.  (i)  Where  there  is  a  contract  to  sell  specific 
goods,  or  where  goods  are  subsequently  appropriated  to  the  con- 
tract, the  seller  may,  by  the  terms  of  the  contract  or  appropriation, 
reserve  the  right  of  possession  or  property  in  the  goods  until  certain 
conditions  have  been  fulfilled.  The  right  of  possession  or  prop- 
erty may  thus  be  reserved  notwithstanding  the  delivery  of  the 
goods  to  the  buyer,  or  to  a  carrier  or  other  bailee  for  the  purpose 
of  transmission  to  the  buyer. 

(2)  Where  goods  are  shipped,  and  by  the  bill  of  lading  the 
goods  are  deliverable  to  the  seller  or  his  agent,  or  to  the  order  of 
the  seller  or  of  his  agent,  the  seller  thereby  reserves  the  property 
in  the  goods.     But  if,  except  for  the  form  of  the  bill  of  lading. 


362  COMMERCIAL    LAW    CASES 

the  property  would  have  passed  to  the  buyer  on  shipment  of  the 
goods,  the  seller's  property  in  the  goods  shall  be  deemed  to  be 
only  for  the  purpose  of  securing  performance  by  the  buyer  of  his 
obligations  under  the  contract. 

(3)  Where  goods  are  shipped,  and  by  the  bill  of  lading  the 
goods  are  deliverable  to  the  order  of  the  buyer  or  of  his  agent, 
but  possession  of  the  bill  of  lading  is  retained  by  the  seller  or  his 
agent,  the  seller  thereby  reserves  a  right  to  the  possession  of  the 
goods,  as  against  the  buyer. 

(4)  Where  the  seller  of  goods  draws  on  the  buyer  for  the 
price  and  transmits  the  bill  of  exchange  and  bill  of  lading  together 
to  the  buyer  to  secure  acceptance  or  payment  of  the  bill  of  ex- 
change, the  buyer  is  bound  to  return  the  bill  of  lading  if  he  does 
not  honor  the  bill  of  exchange,  and  if  he  wrongfully  retains  the 
bill  of  lading  he  acquires  no  added  right  thereby.  If,  however, 
the  bill  of  lading  provides  that  the  goods  are  deliverable  to  the 
buyer  or  to  the  order  of  the  buyer,  or  is  indorsed  in  blank,  or 
to  the  buyer  by  the  consignee  named  therein,  one  who  purchases 
in  good  faith,  for  value,  the  bill  of  lading  of  goods  from  the 
buyer  will  obtain  the  property  in  the  goods,  although  the  bill  of 
exchange  has  not  been  honored :  proznded  that  such  purchaser 
has  received  delivery  oi  the  bill  of  lading  indorsed  by  the  con- 
signee named  therein,  or  of  the  goods,  without  notice  of  the  facts 
making  the  transfer  wrongful. 

3.     Effect  of  Negotiable  Document  of  Title. 

Massachusetts  Acts  and  Resolves,  IQ08.    Chapter  2$y. 

Section  33.  A  person  to  whom  a  negotiable  document  of  title 
has  been  duly  negotiated  acquires  thereby : — 

(a)  Such  title  to  the  goods  as  the  person  negotiating  the  doc- 
ument to  him  had,  or  had  ability  to  convey  to  a  purchaser  in  good 
faith  for  value,  and  also  such  title  to  the  goods  as  the  person  to 
whose  order  the  goods  were  to  be  delivered  by  the  terms  of  the 
document  had,  or  had  ability  to  convey  to  a  purchaser  in  good 
faith  for  value ;  and 

(b)  The  direct  obligation  of  the  bailee  issuing  the  document 
to  hold  possession  of  the  goods  for  him  according  to  the  terms 
of  the  document  as  fully  as  if  such  bailee  had  contracted  directly 
with  him. 

Section  34.  A  person  to  whom  a  document  of  title  has  been 
transferred,  but  not  negotiated,  acquires  thereby,  as  against  the 
transferor,  the  title  to  the  goods,  sub}ect  to  the  terms  of  any  agree- 
ment with  the  transferor. 


SALES  363 

If  the  document  is  non-negotiable,  such  person  also  accjuires 
the  right  to  notify  the  bailee  who  issued  the  document  of  the 
transfer  thereof,  and  thereby  to  acquire  the  direct  obligation  of 
such  bailee  to  hold  possession  of  the  goods  for  him  according  to 
the  terms  of  the  document. 

Prior  to  the  notification  of  such  bailee  by  the  transferor  or 
transferee  of  a  non-negotiable  document  of  title,  the  title  of  the 
transferee  to  the  goods  and  the  right  to  acquire  the  obligation  of 
such  bailee  may  be  defeated  by  the  levy  of  an  attachment  of  exe- 
cution upon  the  goods  by  the  creditor  of  the  transferor,  or  by  a 
notification  to  such  bailee  by  the  transferor  or  a  subsequent  pur- 
chaser from  the  transferor  of  a  subsequent  sale  of  the  goods  by  the 
transferor. 

Section  35.  Where  a  negotiable  document  of  title  is  trans- 
ferred for  value  by  delivery,  and  the  indorsement  of  the  transferor 
is  essential  for  negotiation,  the  transferee  acquires  a  right  against 
the  transferor  to  compel  him  to  indorse  the  document  unless  a 
contrary  intention  appears.  The  negotiation  shall  take  effect  as 
of  the  time  when  the  indorsement  is  actually  made. 

Section  36.  A  person  who  for  value  negotiates  or  transfers 
a  document  of  title  by  indorsement  or  delivery,  including  one 
who  assigns  for  value  a  claim  secured  by  a  document  of  title  unless 
a  contrary  intention  appears,  warrants : — 

(a)  That  the  document  is  genuine ; 

(b)  That  he  has  a  legal  right  to  negotiate  or  transfer  it; 

(c)  That  he  has  knowledge  of  no  fact  which  would  impair 
the  validity  or  worth  of  the  document;  and 

(d)  That  he  has  a  right  to  transfer  the  title  to  the  goods  and 
that  the  goods  are  merchantable  or  fit  for  a  particular  purpose, 
whenever  such  warranties  would  have  been  implied  if  the  contract 
of  the  parties  had  been  to  transfer  without  a  document  of  title 
the  goods  represented  thereby. 

Section  37.  The  indorsement  of  a  document  of  title  shall  not 
make  the  indorser  liable  for  any  failure  on  the  part  of  the  bailee 
who  issued  the  document  or  of  previous  indorsers  thereof  to  fulfil 
their  respective  obligations. 

Section  38.  The  validity  of  the  negotiation  of  a  negotiable 
document  of  title  is  not  impaired  by  the  fact  that  the  negotiation 
was  a  breach  of  duty  on  the  part  of  the  person  making  the  nego- 
tiation, or  by  the  fact  that  the  owner  of  the  document  was  induced 
by  fraud,  mistake,  or  duress  to  entrust  the  possession  or  custody 
thereof  to  such  person,  if  the  person  to  whom  the  document  was 
negotiated  or  a  person  to  whom  the  document  was  subsequently 
negotiated  paid  value  therefor,  without  notice  of  the  breach  of 
duty,  or  fraud,  mistake,  or  duress. 


3^4  COMMERCIAL    LAW    CASES 

IV. 

RIGHTS  OF  THE  PARTIES. 

Notwithstanding  the  fact  that  title  to  the  goods  has  passed 
to  the  buyer,  an  unpaid  seller,  until  he  relinquishes  possession  of 
the  goods,  has  a  lien  on  them  (i.  e.,  a  right  to  retain  them)  for  the 
price.  In  the  following  cases  the  unpaid  seller  may  retain  posses- 
sion until  payment,  or  tender  of  payment,  of  the  price: 

1.  When  goods  have  been  sold  with  no  stipulation  as  to  credit ; 

2.  When  goods  have  been  sold  on  credit  but  the  term  of  credit 
has  expired ; 

3.  When  the  buyer  becomes  insolvent. 

The  unpaid  seller  loses  his  lien : 

1.  When  he  delivers  the  goods  to  a  carrier  or  other  bailee  for 
the  purpose  of  transmission  to  the  buyer,  unless  he  reserves 
the  property  or  the  right  to  possession ; 

2.  When  the  buyer  or  his  agent  lawfully  obtains  possession ; 
3      By  waiving  his  right  to  the  lien. 

The  unpaid  seller  does  not  lose  his  lien  because  he  has  obtained  a 
judgment  for  the  price  of  the  goods. 

In  case  the  buyer  becomes  insolvent,  the  unpaid  seller  has  the 
right  to  stop  the  goods  in  transit  if  he  has  parted  with  possession 
of  them.  Goods  are  in  transit  from  the  time  they  are  delivered  to 
the  carrier  until  the  buyer  takes  delivery.  Goods  are  no  longer 
in  transit  if  they  are  rejected  by  the  buyer  while  the  carrier  has 
possession,  or  if  the  carrier  holds  them  as  agent  for  the  buyer 
although  delivery  has  not  been  made.  If  the  carrier  has  not  actu- 
ally or  constructively  delivered  the  goods  to  the  buyer,  it  must 
upon  notice  of  a  valid  claim  of  the  unpaid  seller,  redeliver  the 
goods  to  the  seller.  This,  however,  it  does  at  its  own  risk ;  for 
the  buyer  has  an  action  against  a  carrier  which  refuses  to  deliver 
goods  to  which  the  buyer  is  properly  entitled. 

Upon  breach  of  a  contract  of  sale,  or  of  a  contract  to  sell,  the 
parties  have  the  rights  of  rescission  and  of  action  for  damages 
which  flow  from  breach  of  an  ordinary  contract.  In  addition, 
there  are  certain  remedies  in  some  measure  peculiar  to  the  law 
of  sales. 

The  seller,  in  event  of  breach  by  the  buyer,  may: 

1.  Resell  the  goods  under  certain  circumstances,  and  re- 
cover his  loss  from  the  buyer.     (See  C.  14  infra.) 

2,  Sue  for  the  ()rice. 


SALES  365 

3.  Sue  for  damages  for  nonacceptance. 

4.  Rescind  the  contract  upon  notification  of  his  election  to 
do  so. 

The  buyer  may: 

1.  Maintain  an  action  for  conversion  of  the  goods  if  the 
title  has  passed,  and  the  seller  wrongfully  refuses  to 
deliver. 

2.  Sue  for  damages  for  nondelivery. 

3.  Seek  specific  performance  of  the  contract,  if  damages 
for  nondelivery  do  not  afford  an  adequate  remedy. 

4.  Rescind  the  contract. 

When  there  has  been  a  breach  of  warranty  on  the  part  of  the 
seller,  the  buyer  may : 

1.  Keep  the  goods  and  set  up  the  breach  of  warranty  by 
way  of  diminution  of  the  price. 

2.  Keep  the  goods  and  sue  for  damages  occasioned  by  the 
breach  of  warranty. 

3.  Refuse  to  accept  the  goods,  if  title  has  not  passed,  and 
sue  for  damages. 

4.  Rescind  the  sale  by  refusing  to  accept,  or  by  returning, 
the  goods,  and  recover  any  amount  paid. 


A.     Unpaid  Vendor's  Lien. 

I.     In  General. 

Arnold  v.  Delano.  4  Cush.   (Mass.)  22- 

Sowerby  &  Grant  purchased  wood  of  Delano,  which  was 
measured  off  but  left  on  Delano's  land.  A  memorandum  of  sale 
was  made  and  the  wood  was  paid  for  by  a  six  months'  note.  Be- 
fore the  note  became  due,  Sowerby  became  insolvent.  His  assignee 
seeks  to  recover  the  value  of  the  wood  from  Delano. 

Held,  that  upon  the  vendee  becoming  insolvent,  the  vendor's 
lien  revives  if  he  still  has  possession  of  the  property  sold,  even 
though  the  sale  was  a  sale  on  credit. 

Shaw,  C.  J. 

There  is  manifestly  a  marked  distinction  between  those  acts, 
which,  as  between  the  vendor  and  vendee  upon  a  contract  of  sale, 
go  to  make  a  constructive  delivery  and  to  vest  the  property  in  the 


366  COMMERCIAL    LAW    CASES 

vendee,  and  that  actual  delivery,  by  the  vendor  to  the  vendee,  which 
puts  an  end  to  the  right  of  the  vendor  to  hold  the  goods  as  security 
for  the  price. 

When  goods  are  sold,  and  there  is  no  stipulation  for  credit  or 
time  allowed  for  payment,  the  vendor  has  by  the  common  law  a  lien 
for  the  price ;  in  other  words,  he  is  not  bound  actually  to  part  with 
the  possession  of  the  goods,  without  being  paid  for  them.  The  term 
lien  imports  that,  by  the  contract  of  sale,  and  a  formal,  symbolical  or 
constructive  delivery,  the  property  has  vested  in  the  vendee;  because 
no  man  can  have  a  lien  on  his  own  goods.  The  very  definition  of  a 
lien  is,  a  right  to  hold  goods,  the  property  of  another,  in  security  for 
some  debt,  duty  or  other  obligation.  If  the  holder  is  the  owner,  the 
right  to  retain  is  a  right  incident  to  the  right  of  the  property;  if  he 
have  had  a  lien,  it  is  merged  in  the  general  property. 

A  lien  for  the  price  is  incident  to  the  contract  for  sale,  when 
there  is  no  stipulation  therein  to  the  contrary;  because  a  man  is  not 
required  to  part  with  his  goods  until  he  is  paid  for  them.  When  a 
credit  is  given  by  agreement,  the  vendee  has  a  right  to  the  custody 
and  actual  possession,  on  a  promise  to  pay  at  a  future  time.  He  may 
then  take  the  goods  away,  and  into  his  own  actual  possession;  and  if 
he  does  so.  the  lien  of  the  vendor  is  gone,  it  being  a  right  incident 
to  the  possession. 

But  the  law,  in  holding  that  a  vendor,  who  has  thus  given  credit 
for  goods,  waives  his  lien  for  the  price,  does  so  on  one  implied 
condition,  which  is,  that  the  vendee  shall  keep  his  credit  good.  If, 
therefore,  before  payment,  the  vendee  becomes  bankrupt  or  insolvent, 
and  the  vendor  still  retains  the  custody  of  the  goods,  or  any  part  of 
them;  or  if  the  goods  are  in  the  hands  of  a  carrier,  or  middle-man, 
on  their  way  to  the  vendee,  and  have  not  yet  got  into  his  actual 
possession,  and  the  vendor,  before  they  do  so,  can  regain  his  actual 
possession,  by  a  stoppage  in  transitu;  then  his  lien  is  restored,  and 
he  may  hold  the  goods  as  security  for  the  price. 

The  principle  we  take  to  be  well  settled,  but  the  difficulty  which 
arises  in  practice — one  which  has  given  rise  to  so  many  cases — lies 
in  determining  what  is  such  an  actual  change  of  possession  from  the 
vendor  to  the  vendee,  as  shall  be  deemed  to  put  an  end  to  the  vendor's 
lien.  Some  cases  seem  to  be  clear,  and  to  illustrate  the  rule.  If  the 
goods  are  delivered  to  the  vendee's  own  servant,  agent,  wagoner,  or 
ship  master,  that  is  in  law  a  delivery  to  the  vendee  himself.  So  if 
goods  are  stored  in  a  common  warehouse,  as  the  dock  warehouses  at 
the  London  docks,  and  entered  in  the  books  as  the  property  of  A.  B., 
and  deliverable  to  him,  and  a  dock  warrant  issued,  and  afterwards, 
upon  the  proper  order  of  A.  B.  on  the  warrant,  the  whole  or  a  part 
arc  transferred  to  C.  D.,  and  entered  in  like  manner  in  his  name, 
this  is  an  actual  change  of  custody,  control  and  possession,  though  the 
goods  are  not  moved  from  their  possession.  So  if  the  seller  sustain 
different  characters,  as  if  a  person,  who  is  a  livery  stable  keeper, 
having  a  horse  to  sell,  makes  a  sale  to  C.  D.,  and  then  transfers  the 
horse  to  his  livery  stable,  to  be  kept  for  C.  D.  at  a  stipulated  weekly 


SALES  367 

hire,  this  may  be  regarded  as  an  actual  change  of  custody  and 
possession. 

But  by  far  the  most  common  case  which  occurs  is  where  goods 
are  ordered  by  letter,  on  credit,  to  be  sent  from  one  country  to 
another,  or  from  one  part  of  the  same  country  to  another,  and  are 
accordingly  forwarded  by  a  common  carrier.  There,  as  the  carrier 
is  not  the  servant  of  the  vendee,  the  goods,  though  they  have  left  the 
actual  possession  of  the  vendor,  if  they  have  not  reached  the 
actual  custody  of  the  vendee,  or  the  ultimate  place  of  destination 
ordered  by  him,  may  be  stopped  in  transitu  by  the  vendor;  and  if  he 
can  thus  stop  them,  he  regains  his  lien. 

The  purchasers  had  a  license  to  go  on  to  the  defendant's  land, 
and  take  the  wood;  whether  this  license  was  revocable  or  not,  it  is 
not  necessary  to  consider,  as  it  was  not  in  fact  revoked.  But  the 
vendees  did  not  enter  and  take  the  wood;  it  remained  on  the  vendor's 
land,  and  in  his  possession,  in  the  same  manner  as  before  and  at  the 
time  of  the  sale.  The  vendor  acted  in  no  new  capacity;  he  was  to 
receive  nothing  for  keeping;  he  was  precisely  in  the  condition  of  a 
vendor  who  had  not  parted  with  the  possession  and  custody  of  the 
goods  sold.  And  this  was  the  state  of  things  when  Sowerby  went 
into  insolvency ;  upon  which  event,  we  think,  the  vendor  was  remitted 
to  his  right  to  keep  possession  of  the  wood  as  security  for  the  price. 
Such  a  vendor  in  possession  is  regarded  as  having  a  higher  equity 
to  retain  for  the  price  than  the  assignee  of  a  debtor,  who  has  not 
paid  for  the  property,  has  to  claim  it  for  the  general  creditors. 

If  it  might  be  supposed  that  the  giving  of  a  note  in  this  case 
was  a  payment,  which  would  vary  the  case  from  that  of  a  simple 
promise  to  pay  for  the  wood,  we  think  the  answer  is  that  a  promissory 
note,  even  if  in  form  negotiable,  whilst  it  remains  in  the  hands  of  the 
vendor  and  not  negotiated,  but  ready  to  be  delivered  upon  the  dis- 
charge of  the  lien,  is  regarded  as  the  evidence  in  writing  of  a  promise 
to  pay  for  the  goods  purchased,  and  does  not  vary  the  rights  of  the 
parties. 

2.     Lien  on  Expiration  of  Credit. 

McElwee  v.  Metropolitan  Lumber  Co.  dp  Fed.  J02. 

The  Metropolitan  Lumber  Company  agreed  to  sell  the  product 
of  its  lumber  mill  during  the  year  1892  to  Barker,  doing  business 
under  the  name  of  Barker  &  Company,  who  gave  three  months' 
notes  for  the  lumber  after  it  was  piled  at  the  mill  and  measured. 
These  notes  were  renewed  by  agreement.  After  the  renewal, 
Barker,  who  had  previously  sold  the  lumber  to  McElwee  &  Carney, 
became  insolvent.  McElwee  &  Carney  seized  the  property  as  theirs 
and  seek  to  establish  their  right  to  it. 

Held,  that  although  title  to  property  has  passed,  a  vendor's 
lien  revives  after  the  term  of  credit  has  expired. 


368  COMMERCIAL    LAW    CASES 

Lurton,  Cir.  J. . 

The  passage  of  title  does  not  militate  against  the  existence  of  a 
vendor's  lien.  Such  a  lien  arises  upon  the  vesting  of  the  title  in 
the  vendee,  and  is  a  mere  right  of  the  vendor  to  retain  possession 
until  the  price  is  paid.  If  the  title  remains  with  the  vendor,  there  is 
no  lien;  and  this  was  explicitly  stated  to  the  jury,  who  distinctly 
found  in  their  general  verdict  that  the  appellee  had  a  vendor's  lien. 
If  such  a  lien  existed  when  appellants  replevied  the  lumber  involved, 
it  arose  in  consequence  of  facts  occurring  after  the  vendee  gave  his 
original  notes.  The  agreement  to  give  credit  for  90  days  after  each 
instalment  of  lumber  was  placed  in  a  deliverable  condition,  and  had 
been  inspected  and  estimated,  was  wholly  inconsistent  with  any  right 
of  the  vendor  to  retain  possession  until  the  price  was  paid.  The  duty 
of  immediate  delivery,  credit  having  been  given,  was  wholly  incon- 
sistent with  a  right  to  hold  as  security  for  the  purchase  price. 

Thus,  after  the  execution  to  the  vendor  of  the  promissory  notes 
of  the  vendee,  the  title  or  right  of  property  and  the  right  of  possession 
to  the  lumber  embraced  within  each  monthly  settlement  were  vested 
in  Barker  &  Co.  The  actual,  manual  possession  was  with  the  Metro- 
politan Lumber  Company,  which  was  under  obligation  to  deliver  to 
the  buyer  as  delivery  should  be  required.  Delivery  could  not  be 
refused  unless  one  of  two  things  should  occur  before  the  actual 
possession  was  surrendered,  namely,  insolvency  of  the  buyer  or 
nonpayment  of  the  price  when  the  credit  expired.  In  case  of  the 
happening  of  either  of  these  contingencies  before  the  actual  possession 
of  the  lumber  passed  from  the  seller  to  the  buyer,  the  vendor's  lien, 
which  had  been  waived  by  a  sale  on  a  credit,  would  revive,  and  the 
vendor  might  lawfully  retain  his  possession  until  the  price  was  paid. 
Even  if  goods  have  been  delivered  to  a  carrier  consigned  to  the 
vendee,  and  insolvency  occur  before  they  reach  the  actual  possession 
of  the  buyer,  the  vendor  may  exercise  the  right  of  stoppage  in  transitu. 
to  recover  his  possession,  and  thereby  revive  his  lien.  The  right  of 
stoppage  in  transitu  is  but  an  equitable  extension  or  enlargement  of 
the  vendor's  lien,  and  is  not  an  independent  or  distinct  right. 

Unless,  therefore,  the  actual  possession  had  been  surrendered 
before  the  alleged  change  in  the  contract,  to  be  hereafter  considered, 
the  vendor's  lien  would  revive,  in  case  insolvency  occurred  before 
delivery  or  the  period  of  credit  expired  and  the  price  was  unpaid. 
The  effect  upon  the  vendor's  right  of  the  expiration  of  the  period  of 
credit  while  the  actual  possession  is  with  the  vendor  is  thus  stated : 

"When  goods  have  been  sold  on  credit,  and  the  purchaser  permits 
them  to  remain  in  the  vendor's  possession  till  the  credit  has  expired, 
the  vendor's  lien,  which  was  waived  by  the  grant  of  credit,  revives 
upon  the  expiration  of  the  term,  even  though  the  buyer  may  not  be 
insolvent." 

This  revesting  of  the  lien  is  not  affected  by  the  fact  that  the 
seller  had  received  conditional  payment  by  promissory  notes  or  bills 
of    exchange,    nor   by    the    fact    that    such    notes    or    bills    had    been 


SALES  369 

negotiated  so  that  they  were  outstanding  when  they  matured,  or 
unmatured  and  outstanding  when  the  insolvency  occurred.  The 
hability  of  defendant  in  error  as  indorser  on  such  notes  as  had  been 
negotiated  operated  to  continue  the  relation  of  an  unpaid  vendor. 
The  right  of  retention  is  not  a  right  of  rescission,  and  it  is  not  essential 
to  the  revival  of  the  lien  that  the  notes  of  the  purchaser  shall  be 
delivered  up  or  ready  for  delivery.  If,  after  the  revival  of  the 
vendor's  lien  by  expiration  of  the  credit,  the  seller  extended  further 
credit  by  taking  renewal  notes,  payable  at  a  future  date,  the  revived 
lien  would  be  waived,  unless  there  was  some  agreement  that  this 
further  credit  should  not  have  that  effect,  and  that  the  seller  should 
hold  the  property  as  security  for  the  renewal  notes.  This  state  of 
things  seems  to  have  been  contemplated  by  the  parties ;  for,  by  one  of 
the  clauses  of  the  original  contract,  a  provision  was  made  for  renewals 
or  extensions  for  such  time  as  the  lumber  in  the  actual  possession 
of  the  vendor  when  an  extension  was  granted  should  "remain  in  the 
possession"  of  the  lumber  company,  "not  exceeding  ninety  days." 
The  reasonable  construction  to  be  placed  upon  this  provision  is  that 
the  revived  lien,  resulting  from  the  expiration  of  the  original  credit, 
should  not  be  waived  by  renewal  of  purchase  notes  and  an  extension 
of  credit.  Before  such  extension,  the  buyer  undoubtedly  had  the 
right  of  property  and  right  of  possession.  After  such  renewals,  all 
right  of  possession  till  the  renewal  notes  were  paid  was  lost.  Inde- 
pendently of  the  agreement  that  extended  credit  should  not  waive 
the  lien  which  had  been  revived  by  expiration  of  original  credit,  the 
insolvency  which  occurred  during  the  running  of  the  renewal  notes 
would  operate  to  revive  the  suspended  lien,  and,  between  vendor  and 
vendee,  or  a  subvendee  standing  on  no  higher  ground  than  the  vendee, 
the  defendant  in  error  had  a  right  to  hold  the  possession  till  the 
renewal  notes  were  paid. 

3.    Effect  of  Delivery  of  Negotiable  Receipt  on  Lien. 

Rummell  v.  Blanchard.    216  N.  Y.  ^48. 

Rummell  &  Company  sold  Alden  &  Company  on  credit  200  cases 
of  shellac  stored  in  a  warehouse,  for  which  they  gave  Alden  & 
Company  negotiable  warehouse  receipts.  Before  paying  for  the 
shellac,  Alden  &  Company  became  insolvent  and  Rummell  &  Com- 
pany seek  the  return  of  the  goods  from  the  warehouseman. 

Held,  that  the  delivery  of  a  negotiable  warehouse  receipt  gives 
possession  of  the  goods  to  the  buyer  and  the  unpaid  vendor's  lien 
is  lost. 

Cardoao,  J. 

The  plaintiffs  insist  that  the  merchandise  was  never  brought  into 
the  possession  of  the  purchasers,  and,  hence,  that  they  have  never  lost 
their  lien  as  vendors  for  the  payment  of  the  price.  The  effect  of  the 
indorsement   of   warehouse    receipts   is    now   prescribed    by    statute. 


370  COMMERCIAL    LAW    CASES 

Where  the  receipts  are  negotiable  in  form,  the  holder  to  whom  they 
have  been  negotiated  acquires  thereby  "(a)  such  title  to  the  goods 
as  the  person  negotiating  the  receipt  to  him  had  or  had  ability  to 
convey  to  a  purchaser  in  good  faith  for  value,  and  also  such  title  to 
the  goods  as  the  depositor  or  person  to  whose  order  the  goods  were 
to  be  delivered  by  the  terms  of  the  receipt  had  or  had  ability  to  convey 
to  a  purchaser  in  good  faith  for  value,  and  (b)  the  direct  obligation 
of  the  warehouseman  to  hold  possession  of  the  goods  for  him  accord- 
ing to  the  terms  of  the  receipt  as  fully  as  if  the  warehouseman  had 
contracted  directly  with  him."  Where  the  receipts  are  not  negotiable 
the  holder  "acquires  the  right  to  notify  the  warehouseman  of  the 
transfer  to  him  of  such  receipt,  and  thereby  to  acquire  the  direct 
obligation  of  the  warehouseman  to  hold  possession  of  the  goods  for 
him  according  to  the  terms  of  the  receipt,"  but  "prior  to  the  notifica- 
tion of  the  warehouseman  of  the  transferor  or  transferee  of  a  non- 
negotiable  receipt,  the  title  of  the  transferee  to  the  goods  and  the 
right  to  require  the  obligation  of  the  warehouseman  may  be  defeated 
by  the  levy  of  an  attachment  or  execution  upon  the  goods  by  a 
creditor  of  the  transferor,  or  by  a  notification  to  the  warehouseman 
by  the  transferor  or  a  subsequent  purchaser  from  the  transferor  of 
a  subsequent  sale  of  the  goods  by  the  transferor."  In  brief,  the  ware- 
houseman who  issues  a  negotiable  receipt  agrees  in  advance  to  hold 
the  goods  for  the  account  of  any  person  to  whom  the  receipt  is 
negotiated,  and  by  the  very  act  of  negotiation  loses  his  position  as 
bailee  for  the  vendor,  and  is  transformed  without  further  assent  into 
a  bailee  for  the  vendee.  The  warehouseman  who  issues  a  non- 
negotiable  receipt  does  not  become  the  bailee  for  the  transferee  of 
the  receipt  until  notice  of  the  transfer.  From  the  moment  of  the 
negotiation  in  the  case  of  a  negotiable  receipt,  and  from  the  moment 
of  notice  in  the  case  of  a  non-negotiable  receipt,  the  holder  of  the 
receipt  is  the  bailor,  and  the  warehouseman's  possession  is  for  the 
account  of  the  new  owner. 

The  significance  of  this  statute  will  become  manifest  when  we 
consider  the  law  as  it  stood  before  the  statute  was  enacted.  It  was 
long  a  mooted  question  whether  the  transfer  of  a  warehouse  receipt 
divested  a  vendor's  lien  unless  the  warehouseman  had  consented  to 
become  the  bailee  for  the  vendee.  Some  courts  held  the  view  that 
such  a  consent  was  necessary.  It  might  be  given  in  advance,  but 
unless  it  was  given  in  some  form,  either  before  or  after  the  event, 
the  warehouseman,  it  was  thought,  remained  the  bailee  of  the  vendor, 
and  the  transfer  of  the  rccci])t,  though  effective  to  change  the  title, 
left  the  possession  undisturbed.  Whether  the  transfer  of  bills  of 
lading  had  any  greater  effect  is  a  question  not  before  us.  It  is  true 
that  the  rule  which  we  have  stated  has  been  criticized;  indeed,  until 
the  enactment  of  the  statute,  we  may  doubt  whether  it  had  been  fully 
ado])tcd  in  this  state.  The  critics  of  the  rule  maintained  that  the 
transfer  of  a  wareliouse  rcccii)t  ought  to  be  deemed  equivalent  to 
an  actual  delivery  even  without  the  warehouseman's  assent;  but  never 
was  it  doubted  that  a  change  of  possession  resulted  where  the  bailee 


SALES  371 

or  agent  of  the  seller  had  given  his  assent,  and  had  thereby  been 
converted  into  a  bailee  or  agent  foi  the  buyer.  Less  may  perhaps 
have  been  required,  but  assuredly  not  more. 

When  the  statute  is  read  in  the  light  of  these  decisions,  its 
meaning  is  not  doubtful.  It  charges  every  warehouseman  who  issues 
a  negotiable  receipt  with  a  direct  obligation  to  any  one  and  every 
one  to  whom  the  receipt  has  been  negotiated.  It  charges  every  ware- 
houseman who  issues  a  non-negotiable  receipt  with  a  like  obligation 
after  notice  of  the  transfer.  In  the  one  case,  the  holder  acquires 
''the  direct  obligation  of  the  warehouseman  to  hold  possession  of  the 
goods  for  him  according  to  the  terms  of  the  receipt  as  fully  as  if  the 
warehouseman  had  contracted  directly  with  him."  In  the  other  case, 
the  holder  acquires  a  like  right  upon  giving  notice  of  the  transfer. 
The  assent  of  the  warehouseman  to  act  as  bailee  is  thus  written  by 
the  law  into  the  contract  embodied  in  the  receipt.  "By  a  receipt  in 
that  form  the  bailee  assents  in  advance  to  becoming  bailee  for  any  one 
who  is  brought  within  the  terms  of  the  receipt  by  an  indorsement 
of  the  same."  The  moment  that  a  receipt,  negotiable  in  form,  is 
indorsed  and  delivered,  a  new  relation  of  bailor  and  bailee  springs  into 
being,  and  with  the  birth  of  that  relation  the  possession,  once  held  by 
the  bailee  for  the  account  of  the  vendor,  is  transmuted  into  a  pos- 
session for  the  account  of  the  vendee.  The  result  "is  a  real  delivery 
to  the  same  extent  as  if  the  goods  had  been  transported  to  another 
warehouse  named  by  the  pledgee."  With  the  transmutation  of  pos- 
session the  vendor's  lien  is  at  an  end. 

The  plaintiffs  insist  that  if  they  have  lost  their  lien,  they  may  none 
the  less  regain  possession  by  the  exercise  of  the  right  of  stoppage 
in  transitu.  This  claim  need  not  long  detain  us.  Merchandise  is  not 
in  transit  unless  it  has  been  delivered  to  a  bailee  for  the  purpose  of 
transportation.  This  merchandise  was  never  delivered  to  a  bailee 
for  that  purpose.  Since  no  transit  was  ever  begun,  there  was  none 
to  intercept. 

4.     Lien   not    Applicable   to    Property    after    Purchaser   has 
Changed  its  Character. 

Douglas  v.  Shumway.  ij  Gray   (Mass.)  4p8. 

Rawson  sold  Benson  all  the  wood  standing  on  certain  land 
belonging  to  him.  Benson  gave  a  note  for  the  purchase  price,  and 
mortgaged  the  wood  to  Douglas  to  secure  a  pre-existing  debt. 
After  the  wood  had  been  cut,  the  defendant,  a  sherifif,  attached 
the  property  in  a  suit  by  Rawson  against  Benson  to  assert  his 
vendor's  lien.  This  action  is  brought  by  Douglas  against  the 
sheriff  for  the  conversion  of  the  wood. 

Held,  that  the  seller  of  standing  timber  does  not  acquire  an 
unpaid  vendor's  lien  when  the  property  is  changed  in  form  into 
personal  property. 


372  COMMERCIAL   LAW    CASES 

Bigelow,  J. 

The  evidence  offered  in  support  of  the  defendant's  claim  to  a 
lien  as  vendor  of  the  wood  was  rightly  rejected.  The  contract  of 
sale  contemplated  that  the  vendee  should  expend  labor  and  money  in 
felling  the  trees  and  preparing  the  wood  for  market;  and  the  case 
finds  that  the  wood  had  been  cut  by  the  vendee,  and  a  portion  thereof 
sold  by  him  and  hauled  off  the  land.  We  think  these  facts  are  in- 
consistent with  an  existing  right  of  lien  in  the  vendor  for  the  purchase 
money.  We  know  of  no  case  where  such  a  right  has  been  recognized, 
after  the  vendee  has,  at  his  own  expense,  in  pursuance  of  the  contract 
of  sale,  changed  the  character  of  the  property,  and  by  his  own  labor 
and  money  added  to  its  value.  By  these  acts  the  vendor  must  be 
deemed  to  have  parted  with  his  possession  and  control  of  the  property. 
The  vendee,  by  himself  and  his  agents,  had  taken  it  into  his  actual 
possession,  and  incorporated  with  it  the  labor  bestowed  by  him  in  pre- 
paring it  for  sale.  There  was  therefore  such  a  change  of  possession 
from  the  vendor  to  the  vendee  as  to  defeat  any  right  of  lien  in  the 
vendor. 

But  on  another  ground  we  think  the  verdict  must  be  set  aside. 
A  contract  for  the  sale  of  standing  \  ood,  to  be  cut  and  carried  away 
by  the  vendee,  is  to  be  construed  as  passing  only  an  interest  in  the 
trees,  when  they  are  severed  from  the  freehold.  They  then  pass  to 
the  vendee  as  personal  property.  Under  the  contract  in  the  present 
case  the  vendee  acquired  no  interest  in  the  land.  He  could  not 
therefore  convey  any  to  the  plaintiff  by  his  mortgage.  His  conveyance 
could  only  operate  to  pass  the  interest  which  he  had  acquired  in  the 
trees  as  personal  chattels. 

5.     Lien  Unaffected  by  Judgment. 

Hoiilditch  V.  Desanges.  2  Starkie  (Eng.)  S37- 

Vignoni  ordered  a  carriage  to  be  made  for  him  by  Houlditch's 
firm.  Vignoni  did  not  take  the  carriage  away  when  it  was  com- 
pleted, and  the  defendant,  a  sheriff,  seized  it  upon  an  attachment 
in  behalf  of  another  creditor  of  \'ignoni.  The  plaintiffs  claim 
an  unpaid  vendor's  lien,  which  the  sheriff  insists  was  lost  by  rea- 
son of  the  fact  that  the  plaintiffs  recovered  judgment  against 
Vignoni  for  the  price. 

Held,  that  recovery  of  judgment  does  not  destroy  an  unpaid 
vendor's  lien. 

Lord  Ellenhorough,  C.  J. 

The  action  was  for  nonperformance  of  the  contract;  if  it  had 
been  for  goods  sold  and  delivered,  the  case  might  have  been  different: 
as  it  was,  the  goods  remained  in  the  custody  of  the  plaintiffs  unde- 
livered, and  the  verdict  did  not  entitle  the  defendant  in  that  action 
to  the  specific  property  before  the  money  was  paid.     As  between  the 


SALES  373 

plaintiffs  and  the  purchaser,  in  case  any  hardship  accrued  to  the 
latter  from  the  detention  of  the  carriage  after  the  verdict  and  before 
payment,  the  case  might  perhaps  be  one  for  the  interference  of  a 
court  of  equity,  but  with  respect  to  the  sheriff,  the  case  is  different ; 
the  plaintiffs  were  in  possession  of  a  carriage  unpaid  for. 


B.     Stoppage  in   Transitu. 

1.  Of  What  the  Right  Consists. 

Jones  V.  Earl,  j/  Cat.  6jo. 

Biggs  &  Jones  sold  liquors  which  they  instructed  the  carrier, 
Earl  &  Company,  to  hold,  after  having  found  out  that  the  vendee 
was  insolvent.  Nevertheless,  upon  the  vendee  tendering  charges 
and  commissions.  Earl  &  Company  delivered  the  goods.  Biggs  & 
Jones  sue  the  carrier  for  conversion. 

Held,  that  a  carrier  who  delivers  goods  to  a  vendee  after  notifi- 
cation to  stop  the  goods  in  transit,  is  liable  to  a  vendor  who  right- 
fully stops  them. 

Sanderson,  J. 

Stoppage  ill  transitu  is  a  right  which  the  vendor  of  goods  upon 
credit  has  to  recall  them,  or  retake  them,  upon  the  discovery  of  the 
insolvency  of  the  vendee,  before  the  goods  have  come  into  his  pos- 
session, or  any  third  party  has  acquired  bona  fide  rights  in  them. 
It  continues  so  long  as  the  carrier  remains  in  the  possession  and 
control  of  the  goods,  or  until  there  has  been  an  actual  or  constructive 
delivery  to  the  vendee,  or  some  tliird  person  has  acquired  a  bona  fide 
right  to  them.  Upon  demand  by  the  vendor,  while  the  right  of  stop- 
page in  transitu  continues,  the  carrier  will  become  liable  for  a  con- 
version of  the  goods,  if  he  decline  to  redeliver  them  to  the  vendor, 
or  delivers  them  to  the  vendee.  And  a  notice  by  the  vendor,  without 
an  e.xpress  demand  to  redeliver  the  goods,  is  sufficient  to  charge  the 
carrier.  If  the  carrier  is  clearly  informed  that  it  is  the  intention 
and  desire  of  the  vendor  to  exercise  his  right  of  stoppage  in  transitu, 
the  notice  is  sufficient.  And  notice  to  the  agent  of  the  carrier,  who 
in  the  regular  course  of  his  agency  is  in  the  actual  custody  of  the 
goods  at  the  time  the  notice  is  given,  is  notice  to  the  carrier. 

2.  To  What  Carriage  the  Right  Extends. 

Johnson  v.  Evcleth.  pj  Me.  ^06. 

Ware  bought  spruce  logs  from  Eveleth,  for  delivery  to  himself 
at  W'inslow.  The  logs  were  floated  down  the  Kennebec  by  a 
log-driving  company.     When  only   a   few   had  arrived,   Eveleth, 


374  COMMERCIAL    LAW    CASES 

upon  learning  that  Ware  was  insolvent,  took  possession  of  the  logs 
from  the  log-driving  company.  Johnson,  Ware's  assignee  in 
insolvency,  sues  to  recover  the  value  of  the  logs. 

Held,  that  the  right  to  stop  goods  in  transit  exists  while  they 
are  in  the  custody  of  a  private  carrier. 

Savage,  J. 

The  question  in  this  connection  is,  May  the  right  of  stoppage  in 
transitu  attach  to  logs  being  driven  as  these  were?  We  have  no 
doubt  that  it  may.  It  may  be  conceded  that  the  log-driving  company 
is  not  a  common  carrier,  although  in  some  respects  its  duties  are 
analogous  to  those  of  common  carriers.  But  that  is  not  decisive. 
When  a  vendor  sends  goods  sold  to  the  place  of  destination  by  private 
conveyance,  the  right  of  stoppage  in  transitu  exists  the  same  as  if 
they  are  sent  by  common  carrier.  The  vital  question  is,  Are  they  in 
transit  between  the  vendor  and  the  vendee?  The  right  of  stoppage 
in  transitu  is  merely  an  extension  of  the  Hen  for  the  price  which  the 
vendor  has,  after  contract  of  sale  and  before  delivery  of  goods,  sold 
on  credit.  The  term  itself  implies  that  the  goods  are  in  transit,  and 
that  they  have  not  come  into  the  possession  of  the  vendee.  It  permits 
the  vendor  to  resume  possession  before  the  goods  sold  have  come  into 
the  vendee's  possession,  if  the  latter  has  become  insolvent.  Whether 
they  are  in  the  possession  of  the  carrier,  strictly  so  called,  while  in 
transit,  or  whether  they  are  in  possession  of  a  "middle-man,"  is  im- 
material. In  this  case  the  logs  were  certainly  in  transit  between  the 
dam  at  East  Outlet  and  Ware's  mill.  They  were  moving  down  the 
river.  They  were  kept  moving  by  the  agency  of  the  log-driving 
company.  The  company  broke  the  jams,  cleared  the  eddies  and  the 
banks  of  logs,  took  them  wherever  they  became  stranded,  and  drove 
in  the  rear.  The  company  having  assumed  the  duty  of  driving  the 
logs,  no  one  else  had  the  right  to  interfere  with  the  driving.  So  far 
as  a  mass  of  logs  in  a  river  is  susceptible  of  possession,  to  that  extent 
the  log-driving  company  was  in  possession  of  these  logs  for  the 
purpose  of  transporting  them.  And  we  think  that  was  sufficient. 
It  certainly  accords  with  the  equitable  principles  out  of  which  the 
right  of  stoppage  in  transitu  has  grown.  The  character  of  the  pos- 
session of  tlie  log-driving  company  is  only  important  as  it  shows  that 
the  logs  had  not  come  into  the  possession  of  the  vendee,  and  were 
still  in  transit. 

But  the  plaintiff  next  contends  that,  so  far  as  this  case  is  con- 
cerned, the  transitus  ended  when  the  logs  were  turned  "over  the  dam" 
at  East  Outlet,  because,  he  says,  that  was  the  ultimate  destination  of 
the  logs,  within  the  meaning  of  the  contract  of  purchase.  In  view 
of  these  circumstances,  shoukl  "over  the  dam"  be  regarded  as  the 
"destination"  of  the  logs?     We  think  not. 

The  (juestion  here  is  not  whether  the  turning  of  the  logs  "over 
the  dam"  was  a  delivery,  such  a  delivery  as  would  have  vested  title 
in  the  vendee,  in  case  delivery  was  necessary.     It  is  not  a  question 


SALES  375 

of  title.  We  assume  that  Ware  had  the  title  to  the  logs.  The 
defendant  bases  his  right  of  stoppage  in  transitu  upon  that  fact  in 
part.  The  exercise  of  that  particular  right  presupposes  that  the  title 
of  the  goods  is  in  the  vendee;  and  further,  the  title  remains  in  the 
vendee  even  after  the  exercise  of  the  right.  The  title  is  not  changed. 
The  question  here  is  whether  by  the  delivery  at  the  dam,  the  logs 
came  into  the  possession  of  the  vendee ;  and  so  far  only  as  the  delivery 
at  the  dam  throws  light  upon  this  question  is  it  material.  The  dis- 
tinction, in  a  word,  is  that  property  sold  may  have  been  delivered  so 
as  to  affect  title,  and  yet  not  have  come  into  the  possession  of  the 
vendee  so  as  to  bar  the  right  of  stoppage  in  transitu.  An  illustration 
of  this  is  found  in  the  common  class  of  contracts  where  the  vendor 
agrees  to  deliver  to  a  carrier  designated  by  vendee,  for  shipment  to 
vendee's  place  of  business.  A  delivery  to  a  carrier  under  such  cir- 
cumstances vests  title  in  the  vendee  and  places  the  goods  subject  to 
his  risk,  but  the  vendor  does  not  lose  his  right  of  stoppage  in  transitu 
while  the  goods  are  in  transit  to  the  vendee.  In  a  case  where  goods 
were  delivered  to  the  purchasing  agent  of  the  vendees  to  be  trans- 
mitted to  the  vendees'  factory  in  another  state,  it  was  held  that  the 
right  of  stoppage  in  transitu  was  not  barred.  The  court  said  that 
the  delivery  of  the  goods  was  to  the  agent,  not  as  owner,  nor  as 
agent  of  the  owners  to  dispose  of  them  in  any  other  way  than  to 
transmit  them  to  the  vendees'  place  of  business,  and  that  to  take  away 
the  right  of  stoppage  in  transitu  there  must  be  an  absolute  delivery 
to  the  agent  for  the  use  of  the  vendees,  and  it  must  have  been  a  full 
and  final  delivery,  as  contradistinguished  from  a  delivery  to  a  person 
acting  as  a  carrier  or  forwarding  agent  to  the  principal.  To  terminate 
the  transitus  by  delivery  to  a  middle-man,  it  must  be  a  delivery  not 
to  transport,  but  to  keep. 

3.     Termination  of  Transit. 

Cabeen  v.  Campbell,  jo  Pa.  St.  2^4. 

Seidel  consigned  steel  blooms  to  Cabeen  &  Company  for 
Chevrier.  After  a  part  of  the  consignment  had  been  delivered  to 
Chevrier,  the  remainder  was  attached  by  Campbell  &  Company 
in  the  hands  of  Cabeen  &  Company  in  a  snit  brought  by  them 
against  Chevrier.  Immediately  afterwards,  Seidel,  upon  finding 
out  that  Chevrier  was  insolvent,  notified  Cabeen  &  Company  to 
stop  the  goods.     Campbell  &  Company  sue  to  establish  their  lien. 

Held,  that  goods  may  be  stopped  in  transit  by  an  unpaid  vendor 
until  such  time  as  the  carrier  holds  the  goods  as  agent  of  the 
vendee. 

Stt-ong,  J. 

The  right  of  a  vendor  to  arrest  goods  sold,  while  they  are  in 
transitu  to  the  vendee,  is  a  right  eminently  favoured  by  the  law. 
So  strongly  is  it  maintained  that  the  vendor  is  permitted  to  resume 


376  COMMERCIAL    LAW    CASES 

his  possession  by  any  means  not  criminal,  while  the  property  is  on 
the  transit.  No  intervening  attachment  or  execution  against  the 
vendee  will  defeat  the  right;  or  be  allowed  to  interpose  any  obstacle 
to  the  vendor's  resumption  of  possession.  Nor  is  this  indulgence  to 
the  seller  without  substantial  reason.  It  is  grossly  inequitable  that 
his  goods,  before  having  reached  the  hands  of  the  vendee,  and  before 
payment,  should  be  appropriated  to  the  satisfaction  of  other  creditors, 
when  the  vendee  becomes  insolvent.  In  accordance  with  this  obvious 
dictate  of  natural  justice,  therefore,  so  long  as  the  goods  are  on  their 
way  to  the  vendee,  and  while  they  are  in  the  hands  of  a  middleman, 
or  a  carrier,  the  equitable  lien  of  the  vendor  remains  a  lien  which 
he  may  enforce  by  arresting  the  further  transit  in  any  way,  even  by 
a  simple  notice. 

But  when  the  transit  is  once  at  an  end,  and  the  delivery  is  com- 
plete, the  lien  of  the  vendor  is  gone.  Therefore  the  right  to  arrest 
the  goods  ceases.  The  question  therefore  ever  is,  where  does  the 
transit  end?  The  answer  to  this  question  would  be  attended  with  no 
difficulty,  were  it  not  that  the  law  recognizes  a  constructive  delivery 
as  sufficient  to  defeat  the  vendor's  lien.  What  is,  and  what  is  not, 
a  constructive  deliver}-,  is  often  not  easy  to  determine.  Until  the 
goods  have  arrived  at  the  place  of  ultimate  destination,  understood 
as  such  between  the  buyer  and  seller,  they  are  ordinarily  liable  to 
stoppage.  But  when  an  intermediate  delivery  occurs,  before  they 
reach  their  ultimate  destination,  if  the  party  to  whom  they  are  de- 
livered has  authority  to  receive  them,  and  give  to  them  a  new  desti- 
nation not  originally  intended,  the  traiisifiis  is  at  an  end.  They  have 
then  reached  the  ultimate  destination  intended  by  both  buyer  and 
seller.  But  if  the  middleman  be  a  mere  agent  to  transmit  the  goods 
in  accordance  with  original  directions,  the  vendor's  right  continues. 
The  rule  may  be  stated  as  follows:  If  in  the  hands  of  the  middleman 
they  require  new  orders  to  put  them  again  in  motion,  and  give  them 
another  substantive  destination;  if  without  such  new  orders  they 
must  continue  stationary,  then  the  delivery  is  complete,  and  the  lien 
of  the  vendor  has  expired. 

What  then  was  the  character  of  the  agency  of  Cabeen  &  Co.. 
the  middleman,  in  this  case?  Were  they  agents  for  custody  alone, 
or  were  they  agents  for  transmission?  If  the  latter,  then  Seidel's 
right  to  stop  the  blooms  continued  until  they  should  reach  Trenton, 
where  the  buyer  lived,  or  until  they  should  come  into  Chevrier's  actual 
possession.  We  think  the  case  stated  shows  them  to  have  been  agents 
for  transmission,  and  that  Trenton  was  the  ultimate  destination 
intended  by  the  vendor  and  vendee. 

4.     Termination  of  Transit. 

Bethell  &  Co.  v.  Chirk  &  Co.   L.  R.  20  Q.  B.  D.  (Eng.)  615. 

Clark  &  Company  sold  hollow  ware  to  Tickle  &  Company,  who 
ordered  it  consi<,nicd  to  a  certain   ship  "to   Melbourne."     Upon 


SALES  377 

finding  out  that  the  buyer  was  insolvent,  the  sellers  tried  to  stop 
the  goods  in  transit  before  the  goods  arrived  on  the  ship,  but  were 
unable  to  do  so.  They  did  stop  them  in  the  hands  of  the  master 
of  the  ship,  and  the  question  arises  between  the  trustees  of  the 
purchasers  and  the  sellers  whether  the  transit  had  ended. 

Held,  that  until  fresh  directions  are  given  by  the  purchasers 
for  a  new  transit,  the  goods  may  be  stopped  by  the  seller. 

Lord  Eshcr,  M.  R. 

In  this  case  the  vendors  being  unpaid  and  the  purchasers  having- 
become  insolvent,  according  to  the  law  merchant  the  vendors  had  a 
right  to  stop  the  goods  while  in  transitu,  although  the  property  in 
such  goods  might  have  passed  to  the  purchasers.  The  doctrine  of 
stoppage  in  transitu  has  always  been  construed  favourably  to  the 
unpaid  vendor.  The  rule  as  to  its  application  has  been  often  stated. 
When  the  goods  have  not  been  delivered  to  the  purchaser  or  to  any 
agent  of  his  to  hold  for  him  otherwise  than  as  a  carrier,  but  are  still 
in  the  hands  of  the  carrier  as  such  and  for  the  purposes  of  the  transit, 
then,  although  such  carrier  was  the  purchaser's  agent  to  accept  de- 
livery so  as  to  pass  the  property,  nevertheless  the  goods  are  in  transitu 
and  may  be  stopped.  There  has  been  a  difficulty  in  some  cases  where 
the  question  was  whether  the  original  transit  was  at  an  end,  and  a 
fresh  transit  had  begun.  The  way  in  which  that  question  has  been 
dealt  with  is  this :  where  the  transit  is  a  transit  which  has  been  caused 
either  by  the  terms  of  the  contract  or  by  the  directions  of  the  pur- 
chaser to  the  vendor,  the  right  of  stoppage  in  transitu  exists;  but,  if 
the  goods  are  not  in  the  hands  of  the  carrier  by  reason  either  of  the 
terms  of  the  contract  or  of  the  directions  of  the  purchaser  to  the 
vendor,  but  are  in  transitu  afterwards  in  consequence  of  fresh  direc- 
tions given  by  the  purchaser  for  a  new  transit,  then  such  transit  is 
no  part  of  the  original  transit,  and  the  right  to  stop  is  gone.  So  also, 
if  the  purchaser  giVes  orders  that  the  goods  shall  be  sent  to  a  particular 
place,  there  to  be  kept  till  he  gives  fresh  orders  as  to  their  destina- 
tion to  a  new  carrier,  the  original  transit  is  at  an  end  when  they  have 
reached  that  place,  and  any  further  transit  is  a  fresh  and  independent 
transit.  The  question  is,  under  which  of  these  heads  the  present  case 
comes.  In  this  case  the  contract  does  not  determine  where  the  goods 
are  to  go.  It  is  argued  for  the  vendors  that  directions  were  given 
by  the  purchasers  to  the  vendors  that  the  goods  should  be  forwarded 
by  carriers  to  Melbourne,  so  that  while  they  were  in  the  hands  of  any 
of  the  different  sets  of  carriers  who  would  necessarily  be  employed 
in  so  forwarding  them,  and  until  they  arrived  at  Melbourne,  they 
were  still  in  transitu.  The  question,  whether  that  is  so,  is  a  question  of 
fact  in  the  particular  case.  Here  we  have  a  ship  loading  in  the  docks 
for  Melbourne,  and  the  captain  would  have  no  authority  to  receive 
goods  on  board  as  a  warehouseman,  or  for  any  purpose  but  to  be 
carried  to  Melbourne.  The  meaning  is  that  the  goods  were  to  be 
delivered  on  board  to  be  carried  to  Melbourne.     What  would  be  the 


3/8  COMMERCIAL    LAW    CASES 

mode  in  which  they  would  be  so  dehvered?  They  would  be  put  on 
board  and  the  mate's  receipt  would  be  taken  for  them,  the  terms 
of  which  would  show  that  the  goods  were  received  for  carriage  to 
Melbourne,  and  a  bill  of  lading  would  afterwards  be  signed  in  the 
terms  of  such  receipt.    That  is  what  was  done  here. 

It  follows,  in  my  opinion,  that  those  goods  were  in  the  hands  of 
carriers  as  such,  and  in  the  course  of  the  original  transitus  from 
the  time  they  left  Wolverhampton  till  they  reached  Melbourne.  The 
case  therefore  falls  within  the  doctrine  of  stoppage  in  transitu,  and 
is  not  within  the  class  of  cases  where  goods  going  through  the 
hands  of  a  number  of  carriers,  at  some  stage  in  the  process  fresh 
directions  are  required  from  the  purchaser  as  to  further  carriage. 

5.     Effect  of  Assignment  of  Bill  of  Lading. 

NewJmll  V.  The  Central  Pacific  Railroad  Co.  51  Cal.  J45. 

Hart  &  Company  sold  goods  to  Adelsdorfer  Brothers,  and 
shipped  them  over  the  defendant  road.  The  sellers  notified  the 
defendant  that  the  consignee  had  failed  and  that  they  stopped  the 
goods  in  its  hands.  Immediately  after  this,  Adelsdorfer  Brothers 
assigned  the  bills  of  lading  to  the  plaintiffs,  who  were  not  aware 
of  the  insolvency  of  Adelsdorfer  Brothers,  nor  of  the  notification. 
They  demanded  delivery  of  the  goods  from  the  railroad  but  deliv- 
ery was  refused.    They  now  sue  for  that  refusal. 

Held,  that  a  seller  loses  his  right  to  stop  goods  in  transit  if  an 
innocent  purchaser  buys  them  by  bill  of  lading  which  he  takes 
without  notice  of  stoppage. 

Crockett,  J. 

There  are  numerous  decisions,  both  in  England  and  America,  to 
the  effect  that  where  goods  are  consigned  by  the  vendor  to  the  vendee, 
under  bills  of  lading  in  the  usual  form,  as  in  this  case,  an  attempt 
by  the  vendor  to  stop  the  goods  in  transitu  will  be  unavailing  as 
against  an  assignee  of  the  bill  of  lading,  who  took  it  in  good  faith, 
for  a  valuable  consideration,  in  the  usual  course  of  business,  before 
the  attempted  stoppage.  There  being  little  or  no  conflict  in  the 
authorities  on  the  point  adjudicated  in  that  case,  it  would  be  useless 
to  recapitulate  them  here.  But  it  is  important  to  ascertain  the  prin- 
ciples which  underlie  these  decisions,  that  we  may  determine  to  what 
extent,  if  at  all,  they  are  applicable  to  the  case  at  bar.  The  first, 
and,  as  I  think,  the  controlling  point  determined  in  these  cases,  is, 
that  by  the  bill  of  lading  the  legal  title  to  the  goods  passes  to  the 
vendee,  subject  only  to  the  lien  of  the  vendor  for  the  unpaid  price; 
which  lien  continues  only  so  long  as  the  goods  are  in  transit,  and 
can  be  enforced  only  on  condition  that  the  vendee  is  or  becomes  in- 
solvent while  the  goods  are  in  transit. 

On  the  failure  of  each  of  these  conditions,  the  right  of  stoppage 
is  gone,  and  the  lien  ceases,  even  as  against  the  vendee.     But  it  is 


SALES  379 

further  settled  by  these  adjudications,  that  if  the  bill  of  lading  is 
assigned,  and  the  legal  title  passes  to  a  bona  fide  purchaser  for  a 
valuable  consideration  before  the  right  of  stoppage  is  exercised,  the 
lien  of  the  vendor  ceases  as  against  the  assignee,  on  the  well  known 
principle  that  a  secret  trust  will  not  be  enforced  as  against  a  bona 
tide  holder  for  value  of  the  legal  title.  In  such  a  case,  if  the  equities 
of  the  vendor  and  assignee  be  considered  equal  (and  this  is  certainly 
the  light  most  favorable  to  the  vendor  in  which  the  transaction 
can  be  regarded),  the  rule  applies  that  where  the  equities  are  equal 
the  legal  right  will  prevail.  But  in  such  a  case  it  would  be  difficult 
to  maintain  that  the  equities  are  equal.  The  vendor  has  voluntarily 
placed  in  the  hands  of  the  vendee  a  muniment  of  title,  clothing  him 
with  the  apparent  ownership  of  the  goods ;  and  a  person  dealing  with 
him  in  the  usual  course  of  business,  who  takes  an  assignment  for  a 
valuable  consideration,  "without  notice  of  such  circumstances  as 
render  the  bill  of  lading  not  fairly  and  honestly  assignable,"  has  a 
superior  equity  to  that  of  the  vendor  asserting  a  recent  lien,  known, 
perhaps,  only  to  himself  and  the  vendee. 

These  being  the  conditions  which  determine  and  control  the 
relative  rights  of  the  vendor  and  assignee,  where  the  assignment 
is  made  before  the  notice  of  stoppage  is  given,  precisely  the  same 
principles,  in  my  opinion,  are  applicable  when  the  assignment  is 
made  after  the  carrier  is  notified  by  the  vendor.  Notwithstanding 
the  notice  to  the  carrier,  the  vendor's  lien  continues  to  be  only  a 
secret  trust  as  to  a  person  who  takes  an  assignment  of  a  bill  of 
lading  "without  notice  of  such  circumstance  as  renders  the  bill  of 
lading  not  fairly  and  honestly  assignable."  The  law  provides  no 
method  by  which  third  persons  are  to  be  affected  with  constructive 
notice  of  acts  transpiring  between  the  vendor  and  the  carrier ;  and  in 
dealing  with  the  vendee,  whom  the  vendor  has  invested  with  the  legal 
title  and  apparent  ownership  of  the  goods,  a  stranger,  advancing 
his  money  on  the  faith  of  this  apparently  good  title,  is  not  bound, 
at  his  peril,  to  ascertain  whether,  possibly,  the  vendor  may  not  have 
notified  a  carrier — it  may  be  on  some  remote  portion  of  the  route — 
that  the  goods  are  stopped  in  transitu.  If  a  person  taking  an  assign- 
ment of  a  bill  of  lading  is  to  encounter  these  risks,  and  can  take  the 
assignment  with  safety  only  after  he  has  inquired  of  the  vendor,  and 
of  every  carrier  through  whose  hands  the  goods  are  to  come,  whether 
a  notice  of  stoppage  in  transition  has  been  given,  it  is  quite  certain 
that  prudent  persons  will  cease  to  advance  money  on  such  securities, 
and  a  very  important  class  of  commercial  transactions  will  be  prac- 
tically abrogated. 

6.     Right  not  Lost  by  Wrongful  Dispossession. 

McGill  V.  Chilhowee  Lumber  Company,     iii  Tenn.  552. 

Youmans  Lumber  Company  sold  to  the  Chilhowee  Lumber 
Company  lumber  which  was  stopped  in  transit  before  it  reached 


380  COMMERCIAL    LAW    CASES 

its  destination,  but  after  the  Chilhowee  Lumber  Company  had 
become  financially  embarrassed.  The  Youmans  Lumber  Com- 
pany took  possession  of  it  and  stored  it  within  a  short  distance  of 
the  Chilhowee  Lumber  Company's  property.  The  Chilhowee 
Lumber  Company  then  informed  the  person  with  whom  it  had 
been  left  that  the  lumber  belonged  to  it,  and  thereupon  took  part 
of  it  away.  Later,  the  Chilhowee  Lumber  Company  assigned  the 
rest  of  the  lumber  as  a  security  for  a  debt  to  a  third  party,  not  an 
innocent  purchaser,  who  shipped  most  of  it  away.  The  rest  was 
subsequently  washed  away  by  a  flood.  In  a  general  creditors' 
bill,  the  question  arises  as  to  the  property  rights  in  this  lumber. 
Held,  that  the  right  of  a  seller  to  stop  in  transit  is  not  lost  by 
wrongful  dispossession  of  the  property. 

McAlistcr,  J. 

While  it  is  true  that  the  seller's  lien  is  dependent  upon  possession, 
it  is  also  true  that  it  is  not  extinguished  by  a  wrongful  dispossession 
of  the  property.  The  Court  of  Chancery  Appeals  has  found  as  a  fact 
that  "the  Chilhowee  Lumber  Company  wrongfully  and  without  author- 
ity went  upon  the  yard  of  Mr.  Baugher,  and  by  false  representations 
assumed  to  take  possession  of  said  lumber."  Such  a  wrongful  and 
fraudulent  dispossession  did  not  operate  to  extinguish  the  seller's  lien. 
"The  change  of  possession  must  be  voluntary  to  constitute  a  waiver 
of  the  lien.  Therefore,  where  such  a  change  is  effected  by  force  or 
fraud,  or  without  the  consent  of  the  lienholder,  the  lien  is  not  thereby 
determined." 

It  is  also  true  that  the. Youmans  Lumber  Company  was  entitled 
to  regain  this  possession  from  the  wrongdoer.  "So,  if  by  artifice  or 
evasion  the  buyer  obtained  possession  of  the  goods,  as  upon  a  promise 
or  understanding  of  immediate  payment,  which  afterwards  is  evaded 
or  denied,  the  seller,  who  has  done  nothing  to  estop  himself  or  waive 
his  right,  may  regain  possession  by  virtue  of  his  lien  as  against  any 
one  but  a  bona  fide  purchaser  for  value." 

The  Court  of  Chancery  Appeals  has  found  as  a  fact  that  the 
Southern  Brass  &  Iron  Company  was  not  an  innocent  purchaser,  and 
this  exception  to  the  rule  is  therefore  eliminated  from  this  case.  In 
respect  of  the  remedy  of  the  lienholder  to  recover  the  possession 
of  this  property,  the  law  is  thus  stated,  viz.:  "If  the  property  is 
wrongfully  taken  from  the  custody  of  the  lienholder  by  a  third  person, 
the  lienbolder's  remedy  is  by  an  action  to  recover  the  possession  or 
for  a  wrongful  conversion.  In  the  latter  action  the  measure  of 
damages  is  the  amount  of  the  lien,  not  exceeding  the  value  of  the 
jjroperty." 

The  full  scope  and  meaning  of  the  doctrine  is  that  the  seller 
is  not  to  be  prejudiced  i)y  the  exercise  of  his  right  of  stoppage  in 
transitu,  but  may  enforce  his  contract  of  sale  against  the  purchaser. 
Until  the  seller  has  relinquished  his  right  of  possession  to  the  pur- 


SALES  381 

chaser,  the   latter  cannot,  of  course,  communicate   any   title   to  the 
property  so  as  to  defeat  the  seller's  lien. 

C.     Rights  Accruing  Upon  Breach  of  the  Contract 
I.     Rights  of  Seller  in  General. 

Van  Brocklen  v.  Smcallie.  140  N.  Y.  70, 

Van  Brocklen  agreed  to  sell  Smeallie  his  undivided  third  inter- 
est in  a  partnership.  Smeallie  without  justification  refused  to 
perform  his  part  of  the  contract.  \'an  Brocklen  then  sold  his 
share  for  a  smaller  stun  than  Smeallie  had  agreed  to  pay,  and  now 
sues  Smeallie  for  the  difference. 

Held,  that  when  the  buyer  refuses  to  pay  the  price,  the  seller 
may  resell  the  property  and  sue  the  buyer  for  the  difference. 

Finch,  J. 

In  this  court  the  rule  of  damages  for  a  breach  by  the  buyer  of 
a  contract  for  the  sale  of  personal  property,  is  perfectly  well  settled. 
The  vendor  of  personal  property  has  three  remedies  against  the 
vendee  in  default.  The  seller  may  store  the  property  for  the  buyer 
and  sue  for  the  purchase  price ;  or  may  sell  the  property  as  agent 
for  the  vendee  and  recover  any  deficiency  resulting;  or  may  keep 
the  property  as  his  own  and  recover  the  difference  between  the  con- 
tract price  and  the  market  price  at  the  time  and  place  of  delivery. 
The  rule  applies  not  only  to  cases  where  the  title  passes  at  once, 
but  also  to  cases  where  the  contract  is  executory  but  there  has  been 
a  valid  tender  and  refusal.  Where  the  second  method  is  adopted  and 
the  vendor  chooses  to  make  a  resale,  that  need  not  be  at  auction, 
unless  such  is  the  customary  method  of  selling  the  sort  of  property 
in  question,  nor  is  it  absolutely  essential  that  notice  of  the  time  and 
place  of  sale  should  be  given  to  the  vendee.  Still,  as  the  sale  must 
be  fair,  and  such  as  is  likely  to  produce  most  nearly  the  full  and 
fair  value  of  the  article,  it  is  always  wisest  for  the  vendor  to  give 
notice  of  his  intention  to  resell,  and  quite  inisafe  to  omit  it. 

In  this  case,  the  vendor  acted  strictly  within  the  authority  of 
our  repeated  decisions,  and  must  be  protected  unless  we  are  pre- 
pared, after  misleading  him,  to  reverse  in  some  degree  our  own 
doctrine  deliberately  declared.  What  is  now  said  is  that  we  ought  not 
to  extend  the  vendor's  right  of  resale  to  a  species  of  personal  prop- 
erty such  as  is  involved  in  the  contract  before  us.  That  is  an  er- 
roneous and  misleading  statement  of  the  problem.  The  adjudged 
rule  covers  every  species  of  personal  property.  We  have  said  of  it 
that  it  is  founded  in  good  sense  and  justice,  and  that  it  "is  the  same 
in  all  sales,  and  in  respect  to  property  of  every  description."  The 
rule,  therefore,  needs  no  extension  since  it  already  covers  the 
present  case. 


382  COMMERCIAL    LAW    CASES 

2.  Right  of  Resale. 

Massachusetts  Acts  and  Resolves,  IQ08.    Chapter  2^y. 

Section  60.  (i)  Where  the  goods  are  of  a  perishable  nature, 
or  where  the  seller  expressly  reserves  the  right  of  resale  in  case 
the  buyer  should  make  default,  or  where  the  buyer  has  been  in 
default  in  the  payment  of  the  price  an  unreasonable  time,  an  unpaid 
seller  having  a  right  of  lien  or  having  stopped  rfie  goods  in  transit 
may  resell  the  goods.  He  shall  not  thereafter  be  liable  to  the  origi- 
nal buyer  upon  the  contract  to  sell  or  upon  the  sale,  or  for  any 
profit  made  by  such  resale,  but  may  recover  from  the  buyer  dam- 
ages for  any  loss  occasioned  by  the  breach  of  the  contract  or  the 
sale. 

(2)  Where  a  resale  is  made,  as  authorized  by  this  section,  the 
buyer  acquires  a  good  title  as  against  the  original  buyer. 

(3)  It  is  not  essential  to  the  validity  of  a  resale  that  notice 
of  an  intention  to  resell  the  goods  be  given  by  the  seller  to  the 
original  buyer.  But  where  the  right  to  resell  is  not  based  on  the 
perishable  nature  of  the  goods  or  upon  an  express  provision  of 
the  contract  or  of  the  sale,  the  giving  or  failure  to  give  such 
notice  shall  be  relevant  in  any  issue  involving  the  question  whether 
the  buyer  had  been  in  default  an  unreasonable  time  before  the 
resale  was  made. 

(4)  It  is  not  essential  to  the  validity  of  a  resale  that  notice  of 
the  time  and  place  thereof  should  be  given  by  the  seller  to  the 
original  buyer. 

(5)  The  seller  is  bound  to  exercise  reasonable  care  and  judg- 
ment in  making  a  resale,  and  subject  to  this  requirement  may  make 
a  resale  either  by  public  or  private  sale. 

3.  Right  to  Resell  Goods  Stopped  in  Transit. 

Diem  v.  KohVitz.   4Q  Oh.  St.  41. 

Diem  sold  Koblitz  Brothers  a  large  quantity  of  paper  bags,  for 
which  they  gave  notes.  Afterwards,  upon  finding  that  Koblitz 
Brothers  were  insolvent,  Diem  canceled  his  delivery  of  the  bags, 
exercised  his  right  of  stoppage  in  transitu  and  disposed  of  the 
bags  before  the  notes  became  due.  Koblitz  Brothers  now  sue  for 
damages  resulting  from  that  cancellation  and  resale. 

Held,  that  the  insolvency  of  a  buyer  justifies  the  seller  in  resell- 
ing goods  stopped  in  transit. 

IVilliams,  C.  J. 

We  do  not  understand  it  to  be  claimed  that  the  defendant,  upon 


SALES  383 

learning  of  the  plaintiffs'  insolvency,  might  not  lawfully  retake  the 
goods  while  they  were  yet  in  the  custody  of  the  carrier;  nor  that  he 
was  bound  to  deliver  any  part  of  the  goods  so  long  as  the  insolvency 
of  the  plaintiffs  continued.  The  claim  is,  that  the  right  of  the  vendor 
in  such  case  is  simply  to  retain  possession  of  the  property  until  the 
purchase  price  is  paid;  and  therefore,  a  resale  by  him  before  the  ex- 
piration of  the  credit  puts  it  out  of  his  power  to  deliver  to  the  first 
vendee,  and  so  constitutes  a  breach  of  the  contract  with  him,  for  which 
he  may,  though  insolvent,  maintain  a  special  action  for  damages. 
Whether  this  claim  is  correct  or  not,  is  the  principal  question  in 
the  case. 

The  right  of  stoppage  in  transitu  is  the  right  of  the  vendor  to 
resume  possession  of  the  goods  sold,  while  they  are  in  transit  to  the 
vendee,  who  is  insolvent,  or  in  embarrassed  circumstances.  Actual 
insolvency  of  the  vendee  is  not  essential.  It  is  sufficient  if  before  the 
stoppage  in  transitu  he  was  either  in  fact  insolvent,  or  had,  by  his 
conduct  in  business,  afforded  the  ordinary  apparent  evidences  of 
insolvency.  Nor  is  the  vendor's  right  abridged,  or  in  any  way  affected 
by  the  fact  that  he  has  received  the  vendee's  bills  of  exchange,  or 
other  negotiable  securities  for  the  whole  price,  even  though  they  have 
been  negotiated  and  are  still  outstanding.  It  seems  to  be  well  settled 
that  when  the  right  of  stoppage  in  transitu  is  properly  exercised,  the 
effect  is  to  restore  the  vendor  to  precisely  the  same  position  as  if 
the  goods  had  never  left  his  possession.  He  has  the  same  rights  with 
respect  to  the  property,  and  they  may  be  enforced  in  the  same  way. 
His  right  to  intercept  the  goods  before  they  reach  the  hands  of  the 
vendee,  and  his  right  to  withhold  those  still  in  his  possession,  rest  upon 
the  same  just  principle  that  the  insolvent  vendee  cannot  require  the 
vendor  to  deliver  the  goods  or  perform  the  contract  when  he  him- 
self is  unable  to  pay  for  them,  or  perform  the  contract  on  his 
part. 

When,  by  the  contract,  the  property  is  to  be  delivered  at  a  future 
day,  and  the  vendor  sells  it  to  another  before  that  time  arrives,  the 
vendee  being  able  to  perform  may  have  an  immediate  action ;  for 
the  vendor,  by  thus  disabling  himself  from  performing  by  delivery 
at  the  proper  time,  commits  a  breach  of  the  contract,  and  the  vendee 
need  not  wait  until  the  time  for  the  delivery  arrives.  But  that  rule 
has  no  application  here.  The  obligation  of  the  vendor,  under  a 
contract  like  that  between  the  parties  in  this  case,  is  to  deliver  the 
goods  at  the  time  stipulated  in  the  agreement,  which  is  at  once,  upon 
the  receipt  or  tender  of  the  purchaser's  commercial  paper,  or  within 
a  reasonable  time ;  not  at  the  time  to  which  the  credit  is  extended. 
The  right  of  the  vendee  is  to  receive  the  goods  at  the  time  the  vendor 
contracts  to  deliver  them,  and  he  is  not  bound  to  receive  them  at  any 
other  time.  The  breach  therefore,  on  the  part  of  the  vendor,  if 
there  be  one,  consists  in  his  failure  to  deliver  the  goods  according 
to  the  contract,  and  occurs  at  that  time,  and  not  upon  a  resale  sub- 
sequently made;  and  the  vendee's  cause  of  action  arises,  if  at  all,  upon 
the  failure  to  deliver,  and  not  on  the  resale.     In  the  case  now  before 


384  COMMERCIAL    LAW    CASES 

us,  the  averments  of  the  defendant's  answer,  which  on  the  trial 
he  was  not  permitted  to  prove,  though  he  offered  to  do  so,  show  that 
at  the  time  the  goods  were  to  have  been  deHvered,  according  to  the 
contract  of  sale,  the  plantiffs  were  insolvent,  and  their  paper  dis- 
honored, so  that  the  condition  upon  which  their  right  to  the  goods 
depended  had  not  been  performed  by  them,  and  they  were  without  the 
necessary  ability  to  perform  the  same.  Upon  what  just  principle  can 
the  seller  in  such  a  case  be  required  to  hold  the  goods  until  the  ex- 
piration of  the  credit?  It  is  true  that  at  that  time  the  vendee  may 
again  be  solvent,  and  able  to  pay.  There  is  no  presumption  or  as- 
surance that  he  will.  If  any  presumption  arises,  it  is  rather  that  the 
insolvency  wall  continue,  which  is  more  in  accordance  with  the  experi- 
ence of  the  commercial  world.  But,  as  we  have  seen,  it  is  part  of 
the  vendee's  engagement  that  he  will  maintain  his  credit,  which  is 
broken  by  his  insolvency.  And  it  would  be  unjust  to  require  the 
vendor  to  sustain  the  loss  resulting  from  the  destruction  or  deteriora- 
tion of  the  goods  in  the  meantime,  which,  in  many  instances  must 
ensue  if  the  seller  is  compelled  to  keep  the  goods  shut  up,  and  take 
the  risk  of  the  future  solvency  of  the  buyer.  The  injustice  of  such  a 
requirement  is  conceded  where  the  goods  are  of  a  perishable  nature; 
and  the  vendor,  it  is  now  settled,  is  not  obliged  to  keep  goods  of  that 
character  until  the  termination  of  the  credit.  It  is  insisted,  however, 
that  the  right  of  sale  in  such  cases  constitutes  an  exception  to  the  rule. 
In  our  opinion,  the  reason  upon  which  the  exception  rests,  if  it  be 
such,  should  make  the  exception  the  general  rule.  The  value  of  many 
kinds  of  merchandise,  not  perishable,  depends  largely  upon  their  being 
in  the  market  at  the  appropriate  seasons,  and  to  supply  temporary 
demands;  and  if  not  available  for  those  purposes,  at  the  proper  time, 
they  become  comparatively  worthless,  or  so  reduced  in  value  as  to 
entail  great  loss,  which  may  be  less  only  in  degree,  though  greater  in 
amount,  than  where  the  goods  are  perishable;  and  it  is  no  more  just 
or  equitable  to  subject  the  vendor  to  the  loss  in  the  one  case,  than 
in  the  other.  The  right  of  resale  ought  not,  we  think,  be  made  to 
depend  upon  the  degree  or  extent  of  the  loss  that  must  ensue,  if  it 
should  be  denied.  It  rests  upon  a  different  principle,  and  grows  out 
of  the  failure  of  the  vendee  to  keep  his  engagement.  Not  that  the 
contract  is  thereby  rescinded,  for  that  would  defeat  the  vendor's 
remedy  for  damages  upon  resale  after  due  notice ;  but  that  he 
may  elect  to  treat  the  agreement  for  the  credit  as  at  an  end,  on 
account  of  the  vendee's  default.  We  see  no  good  reason  for 
holding  that  the  rights  of  the  seller  are  any  the  less  vv^here 
the  sale  is  upon  credit,  and  the  property  is  retained  by  him 
on  account  of  the  buyer's  insolvency,  than  they  would  be  if 
the  sale  were  for  cash,  and  the  vendee  was  unable  to  pay 
the  price  agreed  upon.  In  either  case  the  incapacity  of  the 
vendee  to  perform  his  part  of  the  agreement,  and  insolvency  is 
incapacity,  warrants  the  vendor  in  withholding  performance  on 
his    part. 


SALES  385 

4.     Right  of  Carrier  to  Resell. 

Alabama   Great  Southern   Railroad   Company  v.   McKensie. 
1^9  Ga.  410. 

McKenzie  and  Towers  shipped  peaches  from  Alabama  to 
Providence  over  the  road  of  the  defendant  company.  The  peaches 
were  delayed  on  the  way,  and  when  delivery  was  tendered,  the 
consignee  refused  to  take  them.  The  railroad  company  then  had 
the  goods  sold  for  a  price  which  was  not  enough  to  pay  freight 
charges.  McKenzie  and  Towers  now  sue  the  road  for  failure  to 
transport  the  peaches  promptly. 

Held,  that  a  carrier  has  no  right  to  sell  perishable  goods  with- 
out notification  to  the  shipper,  when  possible. 

Evans,  P.  J. 

A  bailment  of  goods  to  a  carrier  confers  no  power  of  sale;  the 
contract  relates  to  their  transportation,  and  the  carrier  has  no  implied 
right  to  sell  them  under  ordinary  circumstances.  If  the  consignee 
rejects  the  goods,  the  carrier's  liability  as  such  ceases,  and  he  becomes 
liable  as  warehouseman.  As  such  warehouseman  he  is  chargeable 
with  the  duty  of  notifying  the  consignor  of  the  consig^nee's  refusal 
to  accept  the  goods,  and  with  the  further  duty  of  holding  the  same 
subject  to  the  order  of  the  consignor.  It  matters  not  whether  the  cause 
of  the  rejection  of  the  goods  by  the  consignee  be  attributed  to  their 
damaged  condition  or  to  the  consignee's  arbitrary  refusal  to  accept 
delivery.  A  consignee  cannot  abandon  the  goods  to  the  carrier  be- 
cause they  may  be  in  a  damaged  condition,  where  that  condition  is 
not  such  as  to  practically  destroy  their  value.  When  the  carrier 
offers  delivery  to  a  consignee  who  refuses  to  accept  the  goods,  the 
carrier  is  chargeable  with  the  duty  of  notifying  the  shipper  that  the 
goods  are  held  subject  to  his  order.  After  rejection  by  the  con- 
signee the  carrier  holds  the  goods  for  the  consignor;  and  it  would 
be  a  breach  of  trust  for  the  carrier  to  sell  the  shipper's  goods  without 
notice  to  him,  unless  the  stress  of  circumstances  be  such  as  to  justify 
the  carrier  in  assuming  the  place  of  the  owner  respecting  the  preserva- 
tion of  the  goods  or  the  protection  of  the  owner.  An  exception  to  the 
general  rule  which  permits  the  carrier  to  sell  the  goods  in  case  of  an 
emergency  was  first  evolved  in  fixing  the  liability  of  a  carrier  by  sea. 
'"In  every  contract  to  carry  freight  there  is  an  implied  obligation  on 
the  part  of  the  shipowner  that  in  the  event  of  any  disaster  happening 
to  the  ship  or  cargo  in  a  port  where  correspondence  cannot  be  had 
with  the  freighter,  the  master  shall  act  as  his  agent  and  use  his  best 
eft'orts  for  the  protection  and  preservation  of  the  cargo.  He  must 
in  such  an  emergency  put  himself  in  the  place  of  the  owner  of  the 
cargo,  and  do  what  the  latter,  as  a  prudent  man,  would  himself  do  for 
his  own  interest  tf  he  were  present."  The  exception  rests  upon  an 
impossibility  to  give  notice  to  the  shipper,  and  an  emergent  condition 


386  COMMERCIAL    LAW    CASES 

requiring  the  prompt  exercise  of  discretion  by  the  carrier.  Though 
the  goods  be  perishable,  nevertheless  the  shipper  must  be  notified, 
whenever  practicable,  before  the  carrier  may  legally  sell  them.  "In 
order  to  justify  the  act  of  the  carrier  in  making  a  sale  of  the  goods, 
and  to  establish  his  title  to  them,  the  purchaser  must  show  that  there 
was  a  necessity  for  the  sale,  arising  from  the  perishable  nature 
of  the  property,  which  made  its  preservation  for  the  owner  imprac- 
ticable, or  that,  from  that  or  some  other  cause,  it  was  neither  possible 
to  proceed  with  its  transportation  nor  to  store  it ;  that  the  carrier  has 
acted  in  good  faith  and  with  sound  discretion;  and  that  it  was  im- 
possible to  communicate  with  the  owner  and  to  receive  instructions 
from  him  as  to  the  course  to  be  pursued,  without  occasioning  a  delay 
which  the  circumstances  and  condition  of  the  property  would  not 
admit.  And  whether,  under  all  the  circumstances,  these  conditions 
existed  to  justify  the  sale,  is,  when  the  action  is  one  at  law,  a  ques- 
tion of  fact  to  be  determined  by  the  jury,  under  proper  instructions 
by  the  court." 

The  evidence  discloses  that  no  effort  was  made  by  the  carrier 
to  notify  the  shipper  that  the  consignee  had  rejected  the  peaches. 

5.    Necessity  of  Tender  Before  Resale. 

Davis  Sulphur  Ore  Co.  v.  Atlanta  Guano  Co.  lop  Ga.  doy. 

The  Ore  Company  agreed  to  sell  the  Guano  Company  sulphur 
ore,  which  the  Ore  Company  then  purchased  in  Europe  and 
shipped  to  this  country.  Before  arrival,  the  Ore  Company  found 
that  the  Guano  Company  had  become  insolvent,  stopped  the  ore 
in  transit,  and  sold  it  for  less  than  the  price  agreed  upon  with  the 
(juano  Company.  The  Ore  Company  now  sues  for  the  difference 
in  price  without  having  tendered  the  ore  or  demanded  payment. 

Held,  that  unless  he  tenders  performance,  a  vendor  who  resells 
property  is  not  entitled  to  damages  incurred. 

Simmons,  C.  J. 

If  the  vendor  resells  the  goods  at  the  vendee's  risk,  and  the  sale 
is  properly  made  after  due  notice  to  the  vendee  of  the  intention  to 
resell,  and  the  goods  bring  less  than  the  contract  price,  the  vendee 
is  conclusively  bound  by  the  resale  and  the  amount  realized  by  it. 
Unless  the  vendee  has  notice  of  the  intention  to  resell,  he  is  not  bound 
by  the  amount  realized,  and  this  is  right  upon  both  principle  and 
justice.  The  vendor  acts  as  the  agent  of  the  vendee  in  making  the 
sale,  and  sells  at  the  vendee's  risk;  and  it  would  be  unjust  to  hold  the 
vendee  bound  except  where  he  has  had  notice  of  the  intention  of  the 
vendor  to  resell.  If  the  vendee  has  notice  he  may  attend  the  sale,  if 
a  jjublic  one,  and  see  that  it  is  fair,  or,  whether  the  sale  be  public 
or  private,  he  may  be  able  to  bring  about  competition  or  to  secure  a 
I)urchaser  who  will  give  the  full  value  of  the  goods.  He  may  be  able 
in   other   ways  U>  jirevcnt   loss   to  himself.      .Some   of  the  cases   hold 


SALES  387 

that  the  resale  is  in  the  nature  of  an  adjudication  against  the  vendee, 
when  he  has  had  full  notice,  as  to  the  value  of  the  goods  at  the  time 
of  such  resale.     If  this  be  so,  it  is  certainly  necessary  that  the  vendee 
should  have  notice  of  the  sale.     "Notice  to  the  buyer  of  the  time  and 
place  of  resale  is  usual,  and  is  important  as  tending  to  prove  the  sale 
a  fair  one;  but  it  is  not  absolutely  necessary  in  all  cases  that  such 
notice  should  have  been  given.     But  although  a  notice  of  the  time 
and  place  of  resale  may  not  be  absolutely  necessary,  it  is  now  generally 
thought  that  the  vendor  should  inform  the  buyer  that  he  intends  to 
exercise  his  right  of  resale  and  hold  him  responsible  for  the  difference 
in  price."     "In  order  to  conclude  the  [purchaser]  in  this  manner,  not 
only  must  it  appear  that  the  resale  was  made  without  unreasonable 
delay,  with  the  same  publicity  and  as  far  as  possible  under  the  same 
conditions  as  the  first,  and  with  an  honest  effort  to  get  the  best  price 
obtainable,  but  it  must  appear  also  that  the  defendant  had  notice  that 
the  sale  was  to  be  at  his  risk.     The  property  resold  at  his  risk  is 
regarded  as  in  some  senses  his  own,  and  the  result  of  the  resale  is 
in  the  nature  of  an  adjudication  against  him;  and  before  he  should 
be  charged  with  the  deficiency,  he  should  be  afforded  an  opportunity 
to  protect  his  interest  and  prevent  a  sacrifice  of  the  property.     Un- 
less notice  is  given  him  that  the  property  is  held  and  will  be  sold 
at  his  risk,  he  has  a  right  to  assume,  if  it  is  sold  again,  that  the  vendor 
elected  to  retain  and  deal  with  it  as  his  own  and  at  his  own  risk." 
In  order  to  entitle  the  vendor  to  proceed  by  resale,   instead  of  by 
rescission  or  by  action  for  the  whole  price,  he  must  manifest  his  elec- 
tion by  preliminary  notice  of  his  intention  to  sell,  stating  in  terms 
or  effect  that  he  will  assert  his  right  of  resale  and  bind  the  buyer 
by  the  price  obtained  and  hold  him   for  the   loss  sustained.     The 
vendee  is  not  bound  for  the  difference  between  the  contract  price 
and  the  price  on  the  resale,  unless  he  has  notice  of  the  vendor's 
intention  to  resell  and  to  hold  him  bound  for  the  difference,  or  unless 
his  refusal  to  take  the  goods  when  tendered  or  to  pay  for  them  has 
rendered  the  notice  superfluous.    It  may  be  said  that  the  [rules  should] 
apply  only  to  the  case  of  a  solvent  vendee  who  refuses  to  accept  and 
pay  for  goods,  and  that  they  do  not  apply  to  cases  where  the  vendee 
has  become  insolvent  after  the  purchase  or  where  the  vendor  has 
exercised  his  right  of  stoppage  in  transitu.    We  cannot  see  that  either 
of  these  circumstances  should  affect  the  question  of  notice.     If  the 
vendee  becomes  insolvent,  he  ought  in  justice  and  good  morals  to 
refuse  to  accept  goods  for  which  he  cannot  pay.     When  the  vendor 
stops  the  goods  in  transitu,  it  appears  from  the  authorities  that  such 
stoppage  does  not  amount  to  a  rescission  of  the  contract  but  puts  the 
vendor  back  in  possession  of  the  goods  to  hold  them,  not  only  to 
protect  his  lien  for  the  purchase-money,  but  also  as  in  the  nature 
of  a  pledge.     When  he  afterwards  exercises  his  right  to  resell,  he 
does  so  as  the  agent  of  the  vendee  and  at  the  latter's  risk.     The 
insolvency  of  the  purchaser  may  relieve  the  vendor  of  the  necessity 
of  tendering  the  goods  and  demanding  payment,  but  notice  of  an 
intention  to  resell  is  still  required. 


388  COMMERCIAL    LAW    CASES 

6.     When  Tender  Must  be  Made. 

Grucn  v.  Old  &  Co.  81  N.  J.  L.  626. 

Ohl  &  Company  agreed  to  sell  Ellis  a  press,  for  which  Ellis 
did  not  pay  and  which  Ohl  &  Company  later  sold  to  the  Leonard 
Works.  Ellis  assigned  the  contract  to  Grtien,  who  sues  for  dam- 
ages for  failure  of  Ohl  &  Company  to  deliver  the  goods  upon 
demand.  The  defense  rests  upon  the  failure  of  Ellis  to  tender 
payment  before  Ohl  &  Company  had  sold  the  goods  to  another 
party. 

Held,  that  a  vendor  of  property  must  within  a  reasonable  time 
tender  delivery  of  the  property  agreed  to  be  sold. 

Swayze,  J. 

Although  the  contract  involved  in  this  case  was  made  before 
the  passage  of  the  Sales  Act  of  1907,  it  is  convenient  to  take  the 
statement  of  the  law  from  that  act,  which  was,  as  far  at  least  as 
this  case  is  concerned,  only  a  codification  of  the  already  existing  law. 
The  rule  as  to  delivery  is  thus  stated  in  section  43 :  "Whether 
it  is  for  the  buyer  to  take  possession  of  the  goods  or  for  the  seller  to 
send  them  to  the  buyer  is  a  question  depending  in  each  case  on  the 
contract,  express  or  implied,  between  the  parties.  Apart  from  any 
such  contract,  express  or  implied,  or  usage  of  trade  to  the  contrar\-, 
the  place  of  delivery  is  the  seller's  place  of  business,  if  he  have  one, 
and  if  not  his  residence;  but  in  case  of  a  contract  to  sell  or  a  sale  of 
specific  goods,  which  to  the  knowledge  of  the  parties  when  the  contract 
or  the  sale  was  made  were  in  some  other  place,  then  that  place  is  the 
place  of  delivery."  In  the  present  case,  there  was  no  special  agree- 
ment as  to  the  place  of  delivery.  The  contract  was  for  the  sale 
of  specific  goods  which  were  to  the  knowledge  of  the  parties  in  the 
A.  J.  Ellis  Company  factory ;  that  place  then  was  the  place  of 
delivery.  Since  the  goods  were  left  by  the  vendor  at  the  place  of 
delivery,  it  was  open  to  both  parties  to  claim  an  actual  delivery  by 
which  the  title  passed  to  the  vendee.  Whether  a  delivery  was  thereby 
effected  was  a  question  depending  on  their  intent,  and  both  parties 
have  treated  the  case  as  if  there  were  no  delivery.  They  have  them- 
selves treated  the  contract  as  an  executory  contract  of  sale — the 
vendor  on  his  part  by  assuming  to  remove  the  goods  and  selling 
them  as  his  own,  and  the  vendee  by  bringing  this  suit  for  damages 
for  breach  of  the  contract  instead  of  a  suit  in  trover  or  replevin  for 
the  goods.  Under  an  executory  contract  of  sale,  delivery  of  the  goods 
and  payment  of  the  price  are  concurrent  conditions,  unless  otherwise 
agreed,  and  the  seller  must  be  ready  and  willing  to  give  possession  of 
the  goods  to  the  buyer  in  exchange  for  the  price,  and  the  buyer  must 
be  ready  and  willing  to  pay  the  price  in  exchange  for  the  possession 
of  the  goods.     Before  either  party  can  put  the  other  in  default  he 


SALES  389 

must  tender  performance  on  his  part.  The  defendant  failed  to 
tender  delivery,  and  although  he  might  have  left  the  goods  in  the 
factory  and  treated  that  as  a  delivery  upon  which  the  purchase 
price  would  become  due,  he  took  a  position  inconsistent  with  that, 
and  thereafter  failed  to  put  Ellis  in  default;  for  although  he  made 
an  unsuccessful  effort  to  demand  the  purchase  price,  the  evidence 
fails  to  show  an  offer  to  deliver  the  press.  Ellis,  on  his  part,  tried 
to  put  the  defendant  in  default  by  the  letter  of  his  attorney  on 
January  nth,  but  this  letter  was  written  after  the  defendant  had 
sold  the  goods  to  the  Leonard  Sheet  Metal  Works,  and  a  tender  of 
the  purchase  price  at  that  time  was  unnecessary,  since  it  was  nuga- 
tory. The  defendant  had  incapacitated  himself  from  performance 
on  his  part.  It  is  urged  on  behalf  of  the  plaintiff  in  error  that  a 
tender  of  the  purchase  price  by  Ellis  after  January  4th,  when  he 
assigned  his  contract  to  Gruen,  is  unavailing,  because  not  made  by  the 
party  interested  as  vendee ;  but  since  a  tender  was  not  necessary,  this 
question  is  unimportant.  The  contract  was  assignable,  as  it  was  a 
mere  contract  for  the  sale  of  a  specific  article  and  no  personal  ele- 
ment was  involved.  The  assignee,  the  present  plaintiff,  before  he 
could  maintain  an  action  was  obliged  to  prove  a  breach  of  the  defend- 
ant, and  since  no  time  for  delivery  was  fixed,  the  defendant  was 
entitled,  as  the  judge  charged,  to  a  reasonable  time  within  which  to 
make  delivery.  Such  is  expressly  declared  to  be  the  rule  by  the  statute 
where  the  contract  requires  the  seller  to  send  the  goods  to  the  buyer. 
This  rule  is  applicable  in  a  case  like  the  present,  where,  although  the 
goods  are  specific  goods  and  are  in  a  certain  place  to  the  knowledge 
of  the  parties  at  the  time  of  the  contract,  they  are  subsequently  re- 
moved by  the  seller.  Such,  too,  was  the  law  prior  to  the  passage 
of  the  act.  The  defendant,  however,  without  trying  to  make  a  de- 
livery, sold  the  goods  to  a  third  person.  It  was  therefore  unnecessary 
for  Gruen  to  tender  the  purchase  price,  since  that  would  have  been 
as  the  judge  told  the  jury  an  idle  ceremony.  It  is  the  defendant's 
incapacity  to  perform,  not  the  plaintift''s  knowledge  thereof,  that 
excuses  performance  on  the  part  of  the  plaintiff. 

7.    Right  of  Rescission. 

Hayes  z\  City  of  Nashville.  80  Fed.  641. 

Hayes  &  Sons,  brokers,  agreed  to  take  bonds  of  the  city  of 
Nashville,  and  deposited  a  sum  of  money  to  guarantee  performance 
of  their  obligation.  They  took  only  a  portion  of  the  bonds  and 
refused  to  take  the  rest.  They  now  sue  to  recover  the  amount 
deposited  on  the  ground  that  the  city,  by  giving  them  notice 
of  rescission  of  the  contract,  put  the  entire  contract  at  an 
end. 

Held,  that  there  may  be  an  abandonment  of  a  contract  not 
amounting  to  rescission,  and  although  the  parties  may  use  words 


390  COMMERCIAL    LAW    CASES 

indicating  a  rescission,  the  court  will  construe  them  as  indicating 
an  abandonment,  if  that  is  the  intent  of  the  parties. 

Taft,  Cir.  J. 

It  was  first  contended  on  behalf  of  the  plaintififs  in  error  that 
the  city  could  not  claim  damages  for  breach  of  the  contract,  by  way 
of  set-off,  because  its  action  in  annulling  the  contract  was  a  complete 
rescission  of  it,  releasing  each  party  from  every  obligation  under  it, 
as  if  there  never  had  been  a  contract  made.  It  is  well  settled  that  a 
technical  rescission  of  the  contract  has  the  legal  effect  of  entitling 
each  of  the  parties  to  be  restored  to  the  condition  in  which  he  was 
before  the  contract  was  made,  so  far  as  that  is  possible,  and  that  no 
rights  accrue  to  either  by  force  of  the  terms  of  the  contract.  But, 
besides  technical  rescission,  there  is  a  mode  of  abandoning  a  contract 
as  a  live  and  enforceable  obligation,  which  still  entitles  the  party 
declaring  its  abandonment  to  look  to  the  contract  to  determine  the 
compensation  he  may  be  entitled  to  under  its  terms  for  the  breach 
which  gave  him  the  right  of  abandonment. 

It  very  frequently  happens  that  laymen  do  not  distinguish  be- 
tween these  two  ways  of  ending  a  contract,  and,  therefore,  that 
words  are  used  by  a  party  which,  literally  and  strictly  construed, 
would  effect  a  complete  rescission  and  destruction  of  the  contract, 
when  the  party's  real  intention  is  only  to  declare  his  release  from 
further  obligation  to  comply  with  the  terms  of  the  contract  by  the 
default  of  the  other  party,  and  his  intention  to  hold  the  other  for 
damages.  In  such  cases,  courts  consider  not  only  the  language  of 
the  party,  but  all  the  circumstances,  including  the  effect  of  a  com- 
plete rescission  upon  the  rights  of  the  parties,  and  the  probability 
or  improbability  that  the  complaining  party  intended  such  a  result, 
in  reaching  a  conclusion  as  to  the  proper  construction  of  the  lan- 
guage used. 

We  cannot  suppose  that  the  city,  in  making  this  contract,  intended 
to  reserve  to  itself  only  the  right  completely  to  destroy  the  contract, 
and  thus  to  obligate  itself  to  give  up  to  the  defaulting  party  the 
indemnity  it  had  been  careful  to  secure  against  loss;  and  yet  such 
must  be  the  construction  of  the  contract,  if  the  annulment  provided 
therein  means  a  complete  rescission.  The  obvious  intent  of  the 
parties  was  that  upon  default  the  city  might  free  itself  from  any 
obligation  thereafter  to  deliver  the  subsequent  installments  of  bonds 
to  W.  J.  Hayes  &  Sons,  and  that  the  fund  deposited  should  be  an 
indemnity  against  any  loss  the  city  might  suffer  by  reason  of  the 
default.  And  it  was  in  accordance  with  such  an  intent  that  the  city 
declared  its  aniuilment  of  the  contract,  for  it  appropriated  to  itself  the 
$3,750  which  still  remained  on  dcjjosit  as  indemnity  for  the  perform- 
ance of  the  contract.  The  declared  intention  of  the  city  to  retain  its 
deposit  can  only  be  reconciled  and  made  consistent  with  its  declara- 
tion of  annuhnent  by  construing  the  latter  to  be  merely  an  abandon- 
ment of  the  contract,  and  not  a  complete  rescission. 


SALES  391 

8.     Right  of  Rescission  for  Breach  of  Warranty. 

Milliken  v.  Skillings.  8p  Me.  180. 

Milliken  agreed  to  sell  the  defendant  sweet  corn  at  $1  per 
dozen  cans.  In  an  action  to  recover  the  balance  due  after  delivery, 
the  defendant  seeks  to  set  off  for  cans  furnished  under  the  agree- 
ment. He  further  claims  that  the  corn  had  no  market  value,  and 
that  he  had  rescinded  the  contract  on  account  of  a  breach  of 
warranty. 

Held,  that  in  order  to  rescind  for  breach  of  warranty,  the  pur- 
chaser must  have  tendered  the  goods  back  to  the  seller. 

IVhitchousc,  J. 

It  is  undoubtedly  settled  law  in  this  state  that  a  sale  of  personal 
property  with  a  warranty  of  quality,  and  without  fraud,  may  be 
treated  as  a  sale  upon  condition  subsequent,  at  the  election  of  the 
purchaser ;  and  in  the  event  of  a  breach  of  the  warranty,  the  prop- 
erty may  be  returned  and  the  sale  rescinded,  since  a  breach  of 
the  warranty  may  be  equally  injurious  to  the  buyer  whether  the  vendor 
acted  in  good  faith  or  bad  faith. 

But  the  right  of  rescission  is  limited  to  cases  where  the  seller 
can  be  put  substantially  in  the  position  which  he  occupied  before 
the  contract.  "Where  a  contract  is  to  be  rescinded  at  all  it  must 
be  rescinded  in  toto,  and  the  parties  put  in  statu  quo."  And  this  rule 
which  makes  it  the  duty  of  a  buyer,  who  would  rescind  a  contract  for 
breach  of  warranty  of  quality,  to  restore  the  seller  substantially  to 
his  former  position,  necessarily  requires  him  to  return  or  tender 
back  to  the  seller  whatever  of  value  to  himself,  or  the  other,  he  has 
received  under  the  contract.  For  breach  of  warranty  the  vendee  may 
"rescind  the  contract  and  recover  back  the  amount  of  his  purchase 
money,  as  in  case  of  fraud.  But,  if  he  does  this,  he  must  first  return 
the  property  sold,  or  do  everything  in  his  power  requisite  to  a  com- 
plete restoration  of  the  property  to  the  vendor,  and,  without  this, 
he  cannot  recover." 

The  law,  however,  requires  neither  impossibilities  nor  idle  and 
useless  ceremonies.  So  if  the  buyer's  offer  to  restore  the  goods 
is  met  by  an  absolute  refusal  of  the  other  party  to  receive  them 
if  tendered,  he  will  be  relieved  of  the  duty  of  actually  returning 
or  tendering  them  to  the  vendor  at  the  place  where  the  title  passed. 

"The  party  seeking  to  rescind  must  ordinarily  restore  or  ofifer 
to  restore  whatever  he  has  received  under  the  contract;  and  in  case 
of  the  refusal  of  the  wrongdoer  to  receive  it,  an  offer  to  restore, 
properly  made,  is  equivalent  to  actual  restoration."  In  the  discus- 
sion of  this  question  the  word  "offer"  is  frequently  used  by  courts 
and  text-writers  as  synonymous  with  "tender,"  and  it  may  be  prop- 
erly so  used  with  reference  to  articles  capable  of  manual  delivery 
and  actually  produced.     But  with  respect  to  heavy  articles  of  mer- 


392  COMMERCIAL   LAW    CASES 

chandise  situated  at  a  distance  from  the  place  to  which  they  must 
be  transported  if  restored  to  the  vendor,  the  phrase  "offer  to  return" 
is  more  commonly  and  more  aptly  employed  to  express  a  willingnef:s, 
or  to  make  a  proposal  to  rescind  the  contract  and  return  the  goods. 
It  is  not  sufficient,  however,  for  a  buyer  who  has  taken  delivery  of 
the  goods  at  the  vendor's  place  of  business,  merely  to  express  a 
willingness  or  make  a  proposal  to  return  the  goods,  or  simply  to  give 
notice  to  the  seller  that  he  holds  the  goods  subject  to  his  order, 
or  to  request  him  to  come  and  take  them  back.  If  he  would  rescind 
the  contract,  he  must  return  or  tender  back  the  goods  to  the  seller 
at  the  place  of  delivery  unless  upon  making  the  offer  so  to  do  he  is 
relieved  of  the  obligation,  as  stated,  by  a  refusal  to  receive  them 
if  tendered.  The  principle  controlling  the  restoration  of  the  status 
qjio  in  this  class  of  cases  is  essentially  the  same  as  the  ordinary  rule 
in  regard  to  the  requisites  of  a  valid  tender,  with  respect  to  which 
all  the  authorities  agree  that  there  must  be  an  actual  production  of 
the  money,  or  its  production  must  be  expressly  or  impliedly  waived. 
It  has  been  seen  that  the  defendant  did  not  claim  that  he  ever 
returned  or  tendered  the  goods  to  the  plaintiff  at  his  place  of  busi- 
ness, or  that  he  was  relieved  from  so  doing  by  any  refusal  of  the 
plaintiff  to  accept  them  if  tendered  there.  When  the  defendant  says 
he  told  the  plaintiff  the  corn  would  be  of  no  use  to  him  and  he  wanted 
him  to  take  it  back,  the  plaintiff  only  made  a  counter  proposition 
that  he  would  take  some  sample  cans  home  and  see  what  he  could 
do  with  them.    This  was  clearly  insufficient  to  constitute  a  rescission. 

g.     Right  to  Sue  for  Price. 

Fisher  Hydraulic  Stone  and  Machinery  Co.  v.  Warner,  ^jj 
Fed.  527. 

The  Machinery  Company  agreed  to  sell  Warner  a  concrete 
mixer  to  be  installed  by  Warner,  who  was  also  to  receive  the 
exclusive  right  to  sell  that  machinery  within  a  limited  territory. 
Warner  refused  to  complete  the  contract,  after  he  had  paid  $500 
on  it.     The  Machinery  Company  sues  for  the  price. 

Held,  that  in  case  of  a  breach  of  a  contract  to  purchase  an 
article  having  no  established  market  value,  the  plaintiff  may  recover 
the  price. 

Hand,  Dis.  J. 

No  testimony  was  offered  as  to  the  market  value  of  the  ma- 
chinery which  the  plaintiff  is  still  holding  in  storage  for  the  account 
of  the  defendant.  The  District  Judge  found  that  the  defendant  had 
broken  his  contract,  but  that  the  measure  of  damages  was  the  dif- 
ference between  the  contract  price  and  market  price,  and,  as  no 
evidence  of  the  market  price  was  offered,  awarded  judgment  for 
the  plaintiff  for  nominal  damages. 


SALES  393 

The  old  rule  of  damages  was  that  if  a  purchaser  refused  to 
take  goods  according  to  his  contract,  tlie  only  damages  which  could 
be  recovered  where  title  had  not  passed  was  a  sum  equivalent  to 
the  difference  between  the  contract  price  and  the  market  price  of 
the  goods,  for  the  reason  that  "the  seller  can  take  his  goods  into 
the  market  and  obtain  his  price  for  them."  The  courts  for  years 
had  refused  to  allow  the  seller  to  recover  the  purchase  price  be- 
cause such  a  remedy  treated  the  failure  of  a  vendee  to  accept  goods 
as  equivalent  to  a  sale  and  delivery  by  the  vendor,  and  thus,  in  effect, 
granted  specific  performance  in  aid  of  the  vendor  when  law  courts 
were  supposed  to  be  clothed  with  no  such  power  in  respect  to  or- 
dinary contracts  for  the  sale  of  merchandise.  The  whole  question 
is  a  puzzling  one,  and  the  decisions  in  the  American  courts  are  in 
conflict.  The  difficulty  is  increased  by  the  fact  that  there  was  no 
testimony  oft'ercd  at  the  trial  to  show  that  the  machinery  had  no 
established  market  value.  The  trial  court  found  that  the  "machinery 
when  made  undoubtedly  had  a  certain  kind  of  market  value,  but 
limited  and  restricted,  and  not  the  ordinary  market  value  of  articles 
of  commerce."  It  would  seem  that  this  court  can  take  judicial 
notice  of  the  fact  that  expensive  machinery  and  fittings  not  yet  in- 
stalled, made  up  of  many  parts,  and  manufactured  to  be  placed  in  a 
plant,  do  not  have  a  stable  market  value,  particularly  when  apparently 
covered  by  patents. 

This  is  a  case,  therefore,  where  the  seller  has  prepared  goods 
of  a  special  kind,  and  not  one  where  he  could  "take  his  goods  into 
the  market  and  obtain  his  price  for  them." 

The  earliest  case  perhaps  where  a  vendor  recovered  the  pur- 
chase money  against  a  vendee  who  refused  to  accept  the  article  sold 
was  [one  where]  the  defendant  had  orally  agreed  to  purchase  a  sulky 
to  be  manufactured  by  the  plaintiff  for  him  which  the  defendant 
arbitrarily  refused  to  accept.  The  discussion  was  principally  as  to 
the  statute  of  frauds  and  the  court  awarded  the  vendor  the  purchase 
price.  While  the  cases  of  contract  to  manufacture  an  article  have 
always  been  treated  in  the  law  of  sales  as  S7ti  generis,  they  seem 
to  have  been  the  source  of  the  New  York  doctrine,  which  now  goes 
the  whole  length  of  allowing  any  seller  to  recover  the  purchase  price 
when  the  buyer  refuses  to  accept  the  goods  and  the  seller  has  held 
them  for  the  vendee's  account,  irrespective  of  whether  title  has 
passed  or  not. 

We  do  not  need  to  go  as  far  as  this,  and  prefer  to  limit  our 
decision  to  cases  where  the  goods  are  of  a  special  kind,  having  no 
ordinary  market  value. 

lo.     Rules  for  Determination  of  Measure  of  Damages. 

Kingman  &  Co.  v.  Western  Mfg.  Co.   92  Fed.  486. 

The  Western  Manufacturing  Company  agreed  to  sell  Kingman 
&  Company  agricultural  implements  of  a  special  character  to  be 


394  COMMERCIAL    LAW    CASES 

made  for  them.  Some  of  these  implements  the  Western  Manu- 
facturing Company  tendered  to  Kingman  &  Company,  who  re- 
fused to  take  them  and  decHned  to  go  on  with  the  contract.  Other 
implements  were  never  tendered  and  in  fact  had  not  heen  made 
hv  the  Western  Manufacturing  Company,  which  sues  to  recover 
ff^r  hreach  of  the  contract. 

Held,  that  the  plaintiff  is  entitled  to  recover  the  difference  he- 
tween  the  amount  which  it  would  cost  to  manufacture  the  goods 
and  the  contract  price. 

Sanborn,  Cir.  J. 

The  court  below,  over  the  objection  of  the  plaintiff  in  error, 
gave  to  the  jury  the  rule  for  the  measure  of  the  damages  of  the 
defendant  in  error  which  would  have  been  applicable  if  it  had 
proved  the  manufacture  and  tender  of  all  the  goods.  It  charged 
them  that,  if  they  found  for  the  defendant  in  error,  it  was  en- 
titled to  recover  the  difference  between  the  contract  price  and  the 
market  value  of  all  the  articles  covered  by  the  contract,  whether 
they  had  been  manufactured  or  not  at  the  time  of  the  breach.  The 
principal  question  in  the  case  is  whether  this  was  the  true  rule 
for  the  measure  of  the  manufacturer's  damages  which  resulted  from 
the  failure  of  the  purchaser  to  order  and  take  the  600  cornshellers 
and  the  1,200  end  gates  which  it  had  not  made,  or  commenced  to 
make,  when  the  purchaser  refused  to  order  or  take  any  more  imple- 
ments  under  the   contract. 

Compensation  is  the  true  measure  of  damages.  The  injured 
party  may  recover  what  he  loses  by  the  breach  of  his  contract,  but 
he  cannot  recover  more,  and  his  recovery  must  always  be  limited 
to  the  losses  which  he  necessarily  suffered  from  the  breach.  After 
he  has  received  notice  that  the  defaulting  party  will  not  perform  the 
contract,  he  may  not  unnecessarily  incur  further  liabilities  or  ex- 
penses in  its  performance,  and  then  charge  the  increased  loss  he  thus 
incurs  to  the  defaulter. 

The  following  rules  for  the  measure  of  damages  for  the  breach 
■of  a  contract  to  manufacture  and  deliver  articles  will  be  found  to 
be  sustained  by  the  authorities,  based  ui)on  the  rule  of  compensation, 
ju.st  and  applicable  to  the  facts  of  this  case : 

1.  The  measure  of  damajj^cs  for  a  breach  of  contract  to  purchase 
personal  i)roperty  is  the  difference  between  the  market  value  and 
the  contract  price  of  the  property  at  tbc  time  of  the  breach,  if  the 
latter  be  greater  than  the  former. 

2.  The  same  rule  is  applicable  to  the  measure  of  damages  re- 
sulting from  the  failure  to  accept  articles  which  have  been  made  and 
are  ready  for  delivery  at  tlie  time  of  the  breach  by  the  purchaser  of 
the  contract  to  purchase  goods  of  a  manufacturer,  but  it  is  not  the 
true  rule  for  the  measure  of  damaj^es  resulting  from  the  breach  on 
account  of  those  not  then  made  and  ready  for  delivery. 

3.  Where  materials  have  been  purchased  and  labor  has  been 


SALES  395 

bestowed  upon  such  articles  under  such  a  contract  before  the  manu- 
facturer has  notice  of  the  brcacli,  his  damages  on  these  articles  are 
the  difference  between  the  amount  it  would  cost  him  to  make  and 
deliver  them  and  their  contract  price,  if  greater,  plus  the  difference 
between  the  value  of  the  partly  manufactured  articles  and  the  cost 
of  the  labor  and  materials  that  had  been  bestowed  upon  them  at  the 
time  of  the  breach,  if  the  cost  be  greater  than  the  value. 

4.  If  materials  have  been  purchased  with  which  to  fulfill  the 
contract,  but  no  work  has  been  bestowed  upon  them  at  the  time 
of  the  breach,  the  measure  of  the  manufacturer's  damages  upon  the 
articles  which  might  have  been  made  with  such  materials  under  the 
contract  is  the  difference  between  the  amount  it  would  cost  him  to 
make  and  deliver  them,  including  the  cost  of  the  materials,  and  their 
contract  price,  if  greater,  plus  the  difference  between  the  cost  and 
the  market  value  of  the  materials  that  have  been  purchased  at  the 
time  of  the  breach,  if  the  market  value  be  less  than  the  cost. 

5.  The  measure  of  the  damages  upon  articles  covered  by  such 
a  contract  for  which  no  materials  had  been  bought,  and  upon  which 
no  work  had  been  expended  at  the  time  of  the  breach,  is  the  differ- 
ence between  the  amount  it  would  cost  the  manufacturer  to  make  and 
deliver  them  and  their  contract  price,  if  that  price  is  greater  than 
the  cost. 

The  application  by  the  court  below  of  the  general  rule  for  the 
measure  of  damages  upon  a  breach  of  a  sale  of  personal  property 
to  the  measure  of  the  damages  for  a  refusal  to  take  from  the  manu- 
facturer in  this  case  articles  that  had  never  been  made  under  the  con- 
tract, was  erroneous,  and  compels  a  reversal  of  the  judgment. 

II.     Damages  in  Stock  Transactions. 

Galigher  v.  Jones.   I2p   U.  S.   /pj. 

Jones,  a  stock  broker,  sues  Galigher,  a  customer,  to  recover  a 
balance  due  on  account  of  stocks  purchased  for  the  account  of 
Galigher.  Galigher  had  telegraphed  orders  to  Jones  to  sell  certain 
stock  and  transfer  the  proceeds  to  other  stock  on  a  certain  day, 
orders  which  Jones  had  not  executed  and  concerning  which  he  had 
not  communicated  with  Galigher.  Galigher  seeks  to  set  off  the  loss 
occasioned  him  by  the  failure  of  Jones  to  comply  with  these  orders. 

Held,  that  the  measiu'e  of  damages  for  failure  of  a  broker  to 
carry  out  an  order  of  his  principal  is  the  difference  between  the 
price  at  which  the  securities  sb.ould  have  been  sold  or  bought,  and 
the  price  within  a  reasonable  time  durmg  which  the  customer  could 
sell  or  replace  those  securities. 

Bradley,  J. 

It  has  been  assumed,  in  the  consideration  of  the  case,  that  the 
measure  of  damages  in  stock  transactions  of  this  kind  is  the  highest 


396  COMMERCIAL    LAW    CASES 

intermediate  value  reached  by  the  stock  between  the  time  of  the 
wrongful  act  complained  of  and  a  reasonable  time  thereafter,  to  be 
allowed  to  the  party  injured  to  place  himself  in  the  position  he  would 
have  been  in  had  not  his  rights  been  violated.  This  rule  is  most 
frequently  exemplified  in  the  wrongful  conversion  by  one  person  of 
stocks  belonging  to  another.  To  allow  merely  their  value  at  the  time 
of  conversion  would,  in  most  cases,  afford  a  very  inadequate  remedy, 
and,  in  the  case  of  the  broker,  holding  the  stocks  of  his  principal, 
it  would  afford  no  remedy  at  all.  The  effect  would  be  to  give  to  the 
broker  the  control  of  the  stock,  subject  only  to  nominal  damages. 
The  real  injury  sustained  by  the  principal  consists  not  merely  in  the 
assumption  of  control  over  the  stock,  but  in  the  sale  of  it  at  an  un- 
favorable time,  and  for  an  unfavorable  price.  Other  goods  wrong- 
fully converted  are  generally  supposed  to  have  a  fixed  market  value 
at  which  they  can  be  replaced  at  any  time;  and  hence,  with  regard 
to  them,  the  ordinary  measure  of  damages  is  their  value  at  the  time 
of  conversion,  or,  in  case  of  sale  and  purchase,  at  the  time  fixed  for 
their  delivery.  But  the  application  of  this  rule  to  stocks  would,  as 
before  said,  be  very  inadequate  and  unjust. 

The  rule  of  highest  intermediate  value  as  applied  to  stock  trans- 
actions has  been  adopted  in  England  and  in  several  of  the  states 
in  this  country;  whilst  in  some  others  it  has  not  obtained.  The 
form  and  extent  of  the  rule  have  been  the  subject  of  much  discussion 
and  conflict  of  opinion. 

Perhaps  more  transactions  of  this  kind  arise  in  the  state  of 
New  York  than  in  all  other  parts  of  the  country.  The  rule  of 
highest  intermediate  value  up  to  the  time  of  trial  formerly  prevailed 
in  that  state,  although  the  rigid  application  of  the  rule  was  depre- 
cated by  the  New  York  Superior  Court  in  an  able  opinion  by  Judge 
Duer.  The  hardship  which  arose  from  estimating  the  damages  by 
the  highest  price  up  to  the  time  of  trial,  which  might  be  years 
after  the  transaction  occurred,  was  often  so  great  that  the  Court 
of  Appeals  of  New  York  was  constrained  to  introduce  a  material 
modification  in  the  form  of  the  rule,  and  to  hold  the  true  and  just 
measure  of  damages  in  these  cases  to  be  the  highest  intermediate 
value  of  the  stock  between  the  time  of  its  conversion  and  a  reason- 
able time  after  the  owner  has  received  notice  of  it  to  enable  him  to 
replace  the  stock. 

On  the  whole  it  seems  to  us  that  the  New  York  rule,  as  finally 
settled  by  the  Court  of  Appeals,  has  the  most  reasons  in  its  favor,  and 
we  adopt  it  as  a  correct  view  of  the  law. 

12.     Damages  for  Breach  of  Warranty. 

Leavitt  v.  Fiberloid  Conipany.   106  Mass.  440. 

The  Fil)crloicl  Company  sold  Leavitt  fiberloid  which  Leavitt 
intended,  as  the  company  knew,  to  use  in  the  manufacture  of 
combs.     The  fiberloid  was  of  poor  stock,  did  not  conform  to  a 


SALES  397 

warranty  that  the  company  would  guarantee  the  stock  to  be  "all 
right,"  and  caused  a  fire  when  it  was  used  by  Leavitt.  Leavitt 
sues  for  damages  occasioned  by  the  fire. 

Held,  that  the  plaintiff  is  entitled  to  damages  proximately  re- 
sulting from  the  breach  of  the  warranty. 

Rugg,  J. 

Assuming  that  an  express  warranty  be  found  to  exist,  it  is 
necessary  to  determine  the  measure  of  damages  to  whi^;h  the  plaintiff 
is  entitled.  Upon  any  breach  of  contract,  whether  of  warranty  or 
otherwise,  the  defendant  is  liable  for  whatever  damages  follow  as 
a  natural  consequence  and  the  proximate  result  of  his  conduct,  or 
which  may  reasonably  be  supposed  to  have  been  within  the  contempla- 
tion of  the  parties  at  the  time  the  contract  was  made  as  a  probable 
result  of  a  breach  of  it.  The  principle  is  ancient  and  familiar. 
The  only  difficulty  lies  in  its  application.  A  review  of  some  of  the 
cases,  wherein  the  natural  and  probable  consequences  of  certain  acts 
have  been  considered,  will  illumine  the  path  upon  the  facts  now 
presented.  In  Boston  Woven  Hose  &  Rubber  Co.  v.  Kendall,  178 
Mass.  22,2,  there  was  a  warranty  by  the  manufacturer  that  an  iron 
boiler  would  bear  a  pressure  of  one  hundred  pounds  to  the  square 
inch  of  surface.  Upon  breach  of  this  warranty  the  plaintiff  was  held 
entitled  to  recover  for  compensation  paid  by  the  purchaser  to  its 
employees  injured  through  an  explosion  of  the  boiler  occurring  by 
reason  of  the  breach  of  the  warranty.  In  Manning  v.  Fitch,  138 
Mass.  273,  upon  a  breach  of  an  agreement  not  to  foreclose  a  mortgage 
upon  a  farm  known  by  the  defendant  to  be  used  by  the  plaintiff'  for  the 
purpose  of  producing  milk,  the  plaintiff  was  permitted  to  recover  the 
money  value  of  the  farm  to  one  engaged  in  that  special  business. 
In  Atkinson  v.  Newcastle  &  Gateshead  Water  Works  Co.,  L.  R,  6 
Ex.  404,  the  defendant  corporation  was  obliged  by  its  charter  to  keep 
w^.ter  at  a  certain  pressure  in  its  pipes  upon  which  were  fire  plugs. 
The  plaintiff  suffered  a  loss  by  fire  by  reason  of  a  failure  of  water. 
It  was  argued  that  the  damage  was  too  remote,  but  Kelley,  C.  B.,  said, 
"What  kind  of  damage  can  be  a  more  proximate  consequence  of  the 
want  of  water  than  the  destruction  by  fire  of  a  house  which  a  proper 
supply  of  water  would  have  saved?" 

Goods  of  this  sort,  when  made  in  the  ordinary  way,  might 
be  liable  to  burst  into  flame  under  the  heat  common  in  their  further 
manufacture,  and  yet  might  be  merchantable  and  salable  as  fiber- 
loid,  even  though  possessing  this  characteristic.  If  this  be  so,  there 
would  be  no  implied  warranty  against  such  inflammability,  and  the 
plaintiff  would  have  no  remedy  for  ignition  under  an  unqualified 
purchase  in  ordinary  course  of  trade.  The  purpose  of  an  express 
warranty  may  have  been  to  secure  for  the  plaintiff  additional  pro- 
tection. If  the  burden  is  sustained  by  the  plaintiff,  both  upon  the 
issue  that  possibility  of  conflagration  caused  by  the  ignition  of  the 
fiberloid  while  being  heated  by  the  plaintiff  was  within  the  scope 


398  COMMERCIAL    LAW    CASES 

of  the  warranty,  and  that  his  injury  was  caused  by  a  breach  of  the 
warranty  and  not  by  other  agencies,  then  a  case  arises  where  the 
usual  rule,  that  damages  may  be  recovered  for  the  difference  be- 
tween the  value  of  the  goods  delivered  and  those  called  for  by  the 
contract,  is  not  applicable,  but  where  a  more  liberal  one  must  prevail. 
But  if  the  jury  find  that  the  danger  of  ignition  of  the  fiberloid  in 
the  process  of  heating  was  understood  by  the  parties  to  be  so  great 
as  to  call  for  such  precaution  in  regard  to  the  place  and  manner 
of  heating  as  would  make  it  unlikely  that  flames  from  it  should  be 
communicated  to  the  building,  and  if  it  was  expected  and  understood 
that  the  plaintiff  would  take  these  precautions,  and  he  failed  to  do  so, 
the  defendant  is  not  liable  for  the  destruction  of  the  building  from  this 
cause.  In  other  words,  the  defendant  would  not  be  liable  for  the 
larger  measure  of  damages  unless  the  jury  find  that  the  plaintiff's 
building  caught  fire  from  this  fiberloid  while  it  was  being  made  into 
combs  in  the  common  and  ordinary  way.  The  plaintiff's  exception 
as  to  the  rule  of  damages  laid  down  by  the  Superior  Court  upon 
the  breach  of  an  express  warranty  must  be  sustained. 

13.     Damages  for  Breach  of  Warranty. 

Brock  V.  Clark.  60  Vt.  551. 

Brock  bought  baled  hay  from  Clark,  which  was  to  be  "good 
hay."  It  was  not  "good  hay,"  but  Brock  resold  it  to  Bruce  for 
more  than  he  had  paid  for  it.  He  now  sues  for  breach  of  the 
\\'arranty. 

Held,  that  a  vendee  may  sue  for  a  breach  of  warranty,  even 
though  he  subsequently  sells  the  property  for  an  amount  greater 
than  that  at  which  he  has  purchased  it. 

Ross,  J. 

It  is  established  by  the  report  of  the  referee  that  the  hay  pur- 
chased of  the  defendant,  and  paid  for  by  the  plaintiff,  was  to  be 
good  hay.  It  was  baled  and  its  quality  could  not  be  ascertained  by 
ordinary  examination.  It  did  not  answer  to  the  character  of  good 
hay.  The  plaintiff  was  entitled  to  the  benefit  of  the  contract,  whether 
he  made  a  profit  or  suffered  a  loss  in  its  sale.  As  the  hay  received, 
because  of  its  damaged  condition,  did  not  fulfill  the  terms  of  the 
contract,  the  plaintiff  was  entitled  to  recover  from  the  defendant 
such  a  sum  of  money  as,  added  to  the  value  of  the  hay  received, 
would  make  the  whole  ccjual  to  the  value  of  good  hay. 

The  judgment  of  the  County  Court  was  for  this  sum  and  no  more. 
The  defendant  made  no  compensation  for  the  deficient  quality  of 
the  hay  by  the  sale  to  Bruce.  He  was  not  a  party  nor  privy  to  that 
sale,  nor  affected  i)y  it  beneficially,  nor  adversely.  That  sale,  except 
as  evidence  of  the  value  of  the  hay  received,  had  no  relation  to  the 
contract  rights  existing  between  tiic  i)laintiif  and  defendant  in  regard 
to  the  hay. 


SALES  399 

14.     Specific  Performance. 
Adams  v.  Messingcr.  14/  Mass.   185. 

Messinger,  the  owner  of  a  patented  injector  for  steam  boilers, 
agreed  to  patent  all  improvements  on  his  injectors  in  Canada  for 
the  benefit  of  Adams,  who  was  interested  in  the  invention.  This 
he  refused  to  do,  and  Adams  brings  a  bill  in  equity  to  compel  him 
to  take  out  letters  patent. 

Held,  that  specific  performance  may  be  granted  in  connection 
with  contracts  referring  to  personal  property  when  that  property 
is  individual  in  its  character  and  is  not  upon  the  market. 

D  evens,  J. 

Contracts  which  relate  to  real  property  can  necessarily  be  satis- 
fied only  by  a  conveyance  of  the  particular  estate  or  parcel  contracted 
for,  while  those  which  relate  to  personal  property  are  often  fully 
satisfied  by  damages  which  enable  the  party  injured  to  obtain  else- 
where in  the  market  property  precisely  similar  to  that  which  he  had 
agreed  to  purchase.  The  distinction  between  real  and  personal  prop- 
erty is  entirely  subordinate  to  the  question  whether  an  adequate 
remedy  can  thus  be  afiforded.  If,  from  the  nature  of  the  personal 
property,  it  cannot,  a  court  of  equity  will  entertain  jurisdiction  to 
enforce  the  contract.  A  contract  for  bank,  railway,  or  other  corpora- 
tion stock  freely  sold  in  the  market,  might  not  be  thus  enforced, 
but  it  would  be  otherwise  where  the  stock  was  limited  in  amount, 
held  in  a  few  hands,  and  not  ordinarily  to  be  obtained. 

Where  articles  of  personal  property  are  also  peculiar  and  in- 
dividual in  their  character,  or  have  an  especial  value  on  account 
of  the  associations  connected  with  them,  as  pictures,  curiosities, 
family  furniture,  or  heirlooms,  specific  performance  of  a  contract 
in  relation  to  them  will  be  decreed.  An  agreement  to  assign  a  patent 
will  be  specifically  enforced.  Nor  do  we  perceive  any  reason  why 
an  agreement  to  furnish  articles  which  the  vendor  alone  can  supply, 
either  because  their  manufacture  is  guarded  by  a  patent  or  for  any 
similar  reason,  should  not  also  be  thus  enforced.  As  the  value  of  a 
patent  right  cannot  be  ascertained  by  computation,  so  it  is  impossible 
with  any  approach  to  accuracy  to  ascertain  how  much  a  vendee  would 
suffer  from  not  being  able  to  obtain  such  articles  for  use  in  his 
business. 

The  contract  of  the  defendant  was  twofold,  to  furnish  and  de- 
liver certain  described  working  steam  injectors  within  a  specified 
time  to  the  plaintiff,  and  also  that,  if  the  defendant  shall  make  im- 
provements in  injectors  for  steam  boilers,  and  shall  take  out  patents 
therefor  in  the  United  States,  he  will  apply  for  letters  patent  in 
Canada,  and  on  obtaining  them  will  assign  and  convey  the  same  to 
the  plaintiff,  and  that  he  will  not  do  any  act  prejudicial  to  these  let- 
ters patent  of  Canada  or  the  monopoly  thus  secured. 


400  COMMERCIAL    LAW    CASES 

That  equity,  by  virtue  of  its  control  over  the  persons  before  the 
court,  takes  cognizance  of  many  things  which  they  may  do  or  be 
able  to  do  abroad,  while  they  are  themselves  personally  here,  will 
not  be  controverted.  One  may  be  enjoined  from  prosecuting  a  suit 
abroad.  He  may  be  compelled  to  convey  land  situated  abroad,  al- 
though the  conveyance  must  be  according  to  the  laws  of  the  foreign 
country,  and  must  be  sent  there  for  record. 

There  is  nothing  to  show  that  the  defendant,  in  making  his 
application  in  Canada  for  the  patent,  is  compelled  to  leave  the  state, 
any  more  than  he  would  be  compelled  to  do  so  if  he  was  an  applicant 
at  Washington.  The  grant  of  such  a  patent  is  an  act  of  administra- 
tion only.  If  it  were  to  be  granted  here,  the  party  would  be  ordered 
to  make  application. 


Chapter  IV. 
AGENCY. 

I. 

RELATIONSHIP  OF  PRINCIPAL  AND  AGENT. 

The  law  of  agency  involves  the  relation  between  principal  and 
agent  and  between  both  and  third  parties  with  whom  the  princi- 
pal deals  through  his  agent.  With  the  law  of  principal  and  agent 
goes  the  law  of  master  and  servant.  An  agent  is  actually  or  impli- 
edly authorized  to  establish  new  legal  relations,  particularly  those 
of  a  contractual  character,  between  his  principal  and  third  parties, 
whereas  the  duty  of  a  servant  consists  chiefly  of  the  performance 
of  mechanical  acts  not  intended  to  create  such  new  relationships, 
save  as  they  arise  out  of  the  performance  of  the  prescribed  duties. 
From  this,  it  may  be  seen  that  the  agent  often  performs  many  acts 
of  a  servant,  and  a  servant,  many  acts  of  an  agent. 

The  relationship  of  principal  and  agent  may  be  formed : 

I.  By  an  agreement  amounting  to  a  contract  or  by  an  agree- 
ment short  of  contract. 

If  the  agency  is  formed  by  contract,  the  ordinary  elements  of 
a  contract  are  necessary  in  order  that  principal  and  agent  may 
mutually  enforce  their  respective  obligations  against  each  other. 
The  agreement,  however,  may  fall  short  of  a  contract  in  that,  for 
example,  consideration  is  lacking.  In  such  event,  there  is  no  obli- 
gation upon  either  of  the  parties  to  execute  the  terms  of  the  agree- 
ment, but  if  the  agent  begins  performance  of  the  agency,  he  will  be 
liable  for  its  improper  execution.  This  idea  is  summarized  by  the 
statement  that  a  gratuitous  agent  is  liable  for  misfeasance  but  not 
for  nonfeasance. 

An  agent  may  be  appointed  orally,  although  it  is  contemplated 
that  he  will  exercise  his  authority  in  writing.  When  the  contract 
between  the  principal  and  third  party  must  be  under  seal,  however, 
the  authority  of  the  agent  must  be  sealed.  To  this  rule  there  are 
the  following  exceptions : 

401 


402  COMMERCIAL    LAW    CASES 

(a)  The  performance  of  an  act  by  an  agent  for,  and  in  the 
presence  of  the  principal,  is  the  act  of  the  principal, 
and  hence  the  question  of  form  of  authority  does  not 
arise. 

(b)  If  the  instrument  is  in  fact,  although  the  law  does  not 
require  that  it  should  be,  under  seal,  as  for  example,  a 
sealed  note,  the  authority  need  not  be  under  seal. 

(c)  An  agent's  authority  to  execute  a  specialty  for  a  cor- 
poration need  not  be  under  seal. 

(d)  One  partner  may  execute  a  specialty  within  the  actual 
or  ostensible  scope  of  firm  business  without  authority 
under  seal  from  the  other  partners. 

(e)  Oral  authority  is  sufficient  for  the  delivery  of  a  deed 
or  for  the  filling  in  of  blanks  in  a  deed. 

2.     By  ratification. 

When  one  person  does  an  act  for  another  without  authority, 
the  person  for  whom  such  act  is  done  may  afterwards  adopt  the 
act  as  done  in  his  behalf,  thereby  giving  it  the  same  legal  effect 
as  if  it  had  been  originally  authorized.  This  subsequent  assent, 
the  effect  of  which  relates  back  to  the  original  act  and  places  the 
principal  in  the  same  position  as  if  he  had  originally  authorized 
the  act,  is  called  ratification.  When  a  person  finds  that  an  act  has 
been  done  in  his  name  or  on  his  behalf,  he  must  ratify  the  act  or 
disaffirm  it.  Silence  does  not  give  consent  to  a  contract  made  by  a 
stranger  on  behalf  of  the  principal,  but  ratification  may  be  implied 
from  any  form  of  conduct  inconsistent  with  disavowal  of  the 
contract.  The  previous  dealings  of  the  parties  may  be  such  that 
the  principal  is  bound  to  disavow  in  order  to  avoid  liability. 

The  following  incidents  of  ratification  are  important : 

(a)  The  principal  must  be  an  existing  person  capable  of 
being  ascertained,  and  the  contract  must  have  been 
made  in  his  name  or  on  his  behalf. 

(b)  The  principal  must,  with  full  knowledge  of  the  facts, 
expressly  or  impliedly  consent  to  become  a  party  to 
the  contract.  This  does  not  include  full  knowledge  of 
the  legal  effect  of  the  act  done  for  him. 

(c)  While  a  contract  required  by  the  statute  of  frauds  to 
be  in  writing  may  be  orally  ratified,  in  most  jurisdic- 
tions a  contract  under  seal  mu.st  be  ratified  under  seal. 

(d)  Ratification  is  analogous  to  acceptance  of  the  contract, 
and  hence  is  irrevocable.  However,  the  rights  of  inter- 
vening strangers,  such  as  creditors,  caimot  be  cut  oft' 
by  this  means,  and  by  the  majority  rule,  the  third  per- 
son may  recede  from  the  contract  at  any  time  prior 
to  ratification. 


AGEXCV  403 

Ratification  cannot  be  made  in  the  following  instances: 

(a)  If  the  act  was  not  an  act  that  the  principal  could  law- 
fully do  at  the  time  it  was  originally  done  in  his  behalf. 

(b)  If  the  act  required  a  present  existing  intention  on  the 
part  of  the  principal,  such  as  the  giving  of  a  notice 
specifying  the  intention  of  the  principal. 

(c)  In  many  jurisdictions,  if  the  act  ratified  was  a  crime  on 
the  part  of  the  agent  at  the  time  it  was  committed.  The 
best  example  of  this  type  of  case  is  forgery. 

3.  By  estoppel. 

When  a  person  without  dissent  allows  another  to  act  for  him 
in  a  particular  transaction  or  course  of  transactions,  he  is  estopped 
to  deny  the  agency  against  any  one  dealing  with  that  other  in 
good  faith  in  reliance  on  the  conduct  of  the  principal.  The  rela- 
tionship, as  far  as  third  persons  are  concerned,  may  arise  with- 
out any  real  agency  between  the  principal  and  agent,  by  reason 
of  misleading  acts  or  acquiescence  of  the  principal.  Estoppel  may 
go  to  the  existence  of  the  agency  or  to  the  extent  of  the  agency. 
In  any  event,  it  must  be  based  upon  acts  of  the  principal  and  not 
of  the  agent  alone. 

From  the  doctrine  of  estoppel,  it  follows  that  one  who  deals 
with  an  agent  acting  within  the  apparent  scope  of  his  authority  but 
actually  beyond  his  authority,  is  protected.  It  follows  also  that 
a  third  person  may  assume  that  the  agent  has  the  powers  reason- 
ably necessary  for  the  execution  of  powers  actually  conferred ; 
the  powers  annexed  by  custom  or  usage  to  the  agency  in  ques- 
tion ;  and  any  other  powers  which  the  principal  reasonably  leads 
the  third  person  to  believe  that  the  agent  possesses. 

4.  By  necessity. 

In  some  cases  the  law  considers  persons  to  be  the  agents  of 
other  parties  by  necessity  arising  from  the  relationship  between 
them.    The  most  common  of  these  cases  are  the  following: 

(a)  In  addition  to  actual  authority  and  ostensible  author- 
ity, a  wife  has  an  agency  by  necessity  to  obtain  those 
necessities  of  life  for  her  support  which  her  husband 
has  neglected  or  even  refused  to  furnish  her.  This 
agency  may  exist  even  though  the  husband  has  noti- 
fied third  persons  not  to  furnish  the  wife  with  sup- 
plies.    It  is  always  limited  to  actual  necessities. 

(b)  An  infant,  in  most  jurisdictions,  has  a  like  agency  by 
necessity,  to  bind  his  father. 

(c)  The  doctrine  is  often  extended  to  cover  the  employ- 
ment of  medical  assistance  in  cases  of  extreme  need, 
particularly  railway  accidents  or  like  emergencies. 


404  COMMERCIAL    LAW    CASES 

A.     Relation  in  General. 

I.     Servants  and  Agents. 

Kingan  &  Co.,  Ltd.  v.  Silver.   JJ  Ind.  App.  80. 

Nichols,  a  traveling  salesman  in  the  employ  of  Kingan  & 
Company,  acting  on  their  instructions,  procured  from  W.  F.  and 
James  Silver  a  note  payable  to  the  order  of  Kingan  &  Company 
in  payment  for  goods  sold.  The  note  originally  bore  interest  only 
after  maturity,  but  it  was  altered  by  Nichols  in  this  respect  with- 
out the  knowledge  of  any  of  the  parties.  Kingan  &  Company 
seek  to  enforce  the  note  in  accordance  with  its  original  terms.  The 
defendants  claim  that  the  alteration  discharged  the  instrument. 

Held,  that  a  servant  has  no  authority  to  change  contracts  of  his 
master;  no  alteration  made  by  him  is  binding,  as  forming  con- 
tractual obligations  for  his  master  is  no  part  of  employment. 

Lots,  J. 

The  change  in  the  note  was  not  made  by  the  plaintiff's  order 
or  direction,  but  it  entrusted  certain  business  to  another  as  its  agent 
and  such  person  made  the  alteration.  If  the  alteration  was  made  by 
the  agent  while  in  the  transaction  of  the  principal's  business  and 
in  the  scope  of  his  authority,  then  the  act  of  the  agent  is  the  act 
of  the  principal.  The  solution  of  this  case  depends  upon  the  rela- 
tion existing  between  Nichols  and  the  plaintiff,  at  the  time  the 
alteration  was  made.  If  he  was  the  plaintiff's  agent,  and  the  act 
was  within  the  scope  of  his  authority,  then  his  act  must  be  deemed 
the  act  of  the  plaintiff,  and  the  law  is  with  the  defendants.  If  his 
position  was  that  of  a  mere  stranger  to  the  note,  then  the  law  is 
with   the   plaintiff. 

This  leads  to  the  inquiry:  "Who  are  agents  and  who  servants?" 
In  the  primitive  conditions  of  society  the  things  which  were  the 
subjects  of  sale  and  trade  were  few  in  number.  There  was  little 
occasion  for  any  one  to  engage  in  commercial  transactions,  and 
wlicn  it  did  become  necessary,  the  business  was  generally  transacted 
by  the  parties  thereto  in  person.  But  the  strong  and  powerful  had 
many  servants  who  were  usually  slaves.  The  servants  performed 
menial  and  manual  services  for  the  master.  As  civilization  advanced, 
the  things  wliich  are  the  subjects  of  commerce  increased,  and  it 
became  necessary  to  perform  commercial  transactions  througli  the 
medium  of  other  persons.  The  relation  of  principal  and  agent  is  but 
an  outgrowth  or  expansion  of  the  relation  of  master  and  servant. 
The  same  rules  that  a])ply  to  the  one  generally  apply  to  the  other. 
There  is  a  marked  simihirity  in  the  legal  consequences  flowing  from 
the  two  relations.     It  is  often  dilficuU  to  distinguish  the  difference 


AGENCY  405 

between  an  agent  and  a  servant.  This  difficulty  is  increased  by  the 
fact  that  the  same  individual  often  combines  in  his  ow^n  person  the 
functions  of  both  agent  and  servant.  Agents  are  often  denominated 
servants  and  servants  are  often  called  agents.  The  word  "servant" 
in  its  broadest  meaning  includes  an  agent.  There  is,  however,  in 
legal  contemplation,  a  difference  between  an  agent  and  a  servant. 
The  Romans,  to  whom  we  are  indebted  for  many  of  the  principles 
of  agency,  in  the  early  stages  of  their  laws  used  the  terms  wandatiini 
(to  put  into  one's  hand  or  contide  to  the  discretion  of  another,)  and 
negotiuni  (to  transact  business  or  to  treat  concerning  purchases) 
in  describing  this  relation.  Agency,  properly  speaking,  relates  to 
commercial  or  business  transactions,  while  service  has  reference  to 
actions  upon  or  concerning  things.  Service  deals  with  matters  of 
manual  or  mechanical  execution.  An  agent  is  the  more  direct  rep- 
resentative of  the  master  and  clothed  with  higher  powers  and  broader 
discretion   than   a   servant. 

The  terms  "agent"  and  "servant"  are  so  frequently  used  inter- 
changeably in  the  adjudications  that  the  reader  is  apt  to  conclude 
they  mean  the  same  thing.  We  think,  however,  that  the  history  of 
the  law  bearing  on  this  subject,  shows  that  there  is  a  difference  be- 
tween them.  Agency,  in  its  legal  sense,  always  imports  commercial 
dealings  between  two  parties  by  and  through  the  medium  of  another. 
An  agent  negotiates  or  treats  with  third  parties  in  commercial  mat- 
ters for  another. 

The  grocer  is  liable  for  the  negligence  of  his  servant,  the 
driver.  But  why  or  upon  what  principle  ?  It  is  sometimes  said  that 
the  reason  for  the  master's  liability  in  such  cases  is  his  negligence 
in  employing  an  unskilful  servant.  If  this  were  really  the  true 
reason,  the  logical  result  would  be  that  if  the  master  was  guilty  of 
no  negligence  in  employing  the  servant,  he  would  not  be  liable.  This, 
however,  we  know  does  not  follow.  It  is  no  defense  that  the  master 
used  the  greatest  care  in  employing  his  servant.  Again,  suppose  an 
engineer  or  servant  of  a  railroad  company  wilfully  ran  a  train  of 
cars  over  another  person;  we  know  the  company  is  liable  for  the 
wrongful  act  of  its  servant,  and  that  it  is  no  excuse  for  the  company 
to  say  it  did  not  authorize  the  act  and  that  it  was  done  without  the 
knowledge  or  consent  of  the  company,  or  against  its  expressed  will 
or  order. 

It  is  difficult  to  understand  this  principle  of  liability  unless  we 
approach  it  from  the  side  of  history.  It  is  in  reality  a  survival  of 
the  ancient  doctrine  that  the  master  or  owner  was  liable  for  the  act 
of  his  slave  and  for  injuries  committed  by  animals  in  his  possession. 
The  ancient  idea  was  that  the  family  of  the  master,  including  his 
slaves,  his  animals,  and  all  other  property,  was  a  unity;  and  that 
the  personality  of  the  master  aft'ected  all  of  his  property;  that  as 
he  was  entitled  to  all  the  benefits  of  ownership  he  must  accept  the 
consequences  flowing  from  injuries  caused  by  his  property.  He 
might  buy  off  the  vengeance  of  the  injured  person  or  he  might  ap- 
pease  it   by   surrendering   the   injured   property   to   the   person   ag- 


406  COMMERCIAL    LAW    CASES 

grieved.    In  Roman  law  there  was  a  class  of  actions  known  as  noxal 
actions,  which  provided  for  this  vicarious  Habihty.     The  defendant 
had   the   option   of    surrendering   the    dehnquent    instead   of    paying 
damages.     In  ancient  times  the  masses  were  slaves ;  in  modern  times 
the  masses  are  freemen.     When  slaves  became  freemen,  the  master 
was  shorn  of  his  power  to  surrender  the  delinquent  servant;  but  he 
still  continues  to  be  liable  for  the  acts  of  his  servant  done  in  the  line 
of  employment.     This  principle  of  liability  originates  in  slavery  and 
in  the  power  and  dominion  that  the  master  exercised  over  the  mem- 
bers of  his  family.     But  it  may  be  said  that,  as  the  master  has  ceased 
to  have  any  property  in  his  servants,  and  as  he  is  shorn  of  his  power 
to  surrender  a  delinquent,  the  reason  for  the  rule  fails,  and  that  the 
law  must  fall  with  the  reason,  and  that  this  would  result  in  exoner- 
ating the  master  from  all  liability  in  all  such  cases.     It  is  true  that 
the  power  of  surrendering  the  delinquent  has  ceased,  but  it  is  not 
true   that   the   personality   of   the   master   has   ceased   to   affect   his 
servants.     The  will  of  the   master   dominates  any  given  enterprise. 
He  calls  to  his  aid,  servants  and  appliances.     The  servant  surrenders 
his  time  and  in  a  measure  permits  the  will  of  the  master  to  dominate 
and  control  his  actions.     He  is  the  instrument  of  his  master  in  ac- 
complishing certain  ends.     The  servant  is  placed  in  the  position  and 
given  the  opportunity  to  commit  the  wrong  by  the  will  of  the  master. 
In  a  qualified  sense  the  servant  is  the  representative  of  the  master. 
Without  the  controlling,   dominating   influence   of   the   master's   will, 
there   is  but   the   remotest   probability   that   the   servant   would  have 
been  placed  in  the  position  or  given  the  opportunity  to  commit  the 
particular   wrong.      Anciently,   the    liability    of   the    master   was    not 
limited  by  the  duties  imposed  upon  his  slave.     When  a  servant  be- 
came a  freeman  he  was  no  longer  a  member  of  the  master's  family, 
and  he  could  not  properly  be  said  to  be  the   representative  of  his 
master  except  in  the  line  of  the  employment.     Modern  jurisprudence 
properly  and  justly  limits  the  liability  of  the  master  to  the  acts  of 
his   servant   done    within    the    .scope    of   the    employment.      There    is 
still  substantial  and  just  grounds  for  the  principle  that  the  master  is 
liable  for  the  wrongful  acts  of  his  servant.     No  liability  arises  against 
the  master  for  the  wrongful  acts  of  his  servant  unless  the  servant  has 
perpetrated  an  injury  either  ui)on  the  person  or  property  of  another. 
Nichols  was  the  servant  of  the  plaintiff  when  he  made  the  altera- 
tion of  the  note.     But  did  he   inflict  any  injury  upon  the   property 
of  the  defendant?     Certainly  not.     The  injury,  if  any,  was  inflicted 
by  the  servant  upon  the  jjroperty  of  his  own  master,  and  not  upon 
the    property    of    the    defendant.      If    appellee's    contention    be    true, 
Nichols  destroyed  the  plaintiff's  note,  and  no  recovery  can  be  had 
upon  it  nor  upon  the  original  consideration.     The  principle  that  the 
master   is   liable    for   the   tortious   acts   of   his   servant   committed   in 
the   line  of   the  em])l<;yiiient   has   no  a])i)lication  to  the   facts  of   this 
case,  for  no  injury  was  done  the  defc  nd.nit's  property. 

ICven    if    it    be    conceded    that    Nichols    was    the    agent    of    the 
plaintiff   when  he  made  the   alteration,   there  is  high   authority  sus- 


AGEXCY  407 

taining  the  position  that  in  doing  so  he  exceeded  his  authority,  and 
that  his  act  would  not  be  binding  on  his  principal.  An  agent,  to 
transact  the  business  of  the  principal,  is  not  clothed  with  authority 
to  destroy  the  property  of  the  principal  or  to  violate  a  rule  of  public 
policy. 


2.     Powers  of  Joint  Agents. 

First  National  Bank  of  North  Bennington  v.  Tozvn  of  Mount 
Tabor.  32  Vt.  87. 

The  Town  of  Mount  Tabor  in  pursuance  of  a  statute  passed  to 
enable  towns  to  obtain  railroad  communication,  issued  bonds  in 
1867,  for  the  payment  of  which  the  plaintiff  sues.  The  statute 
authorized  the  issue  upon  the  assent  of  a  majority  of  tax  payers 
evidenced  by  an  instrument  of  assent  certified  by  a  board  of  three 
commissioners.  Only  two  of  the  commissioners  of  the  town  signed 
the  instrument ;  the  third  refused  to  do  so  on  account  of  his  belief 
that  a  majority  of  the  tax  payers  had  not  assented.  At  the  trial, 
the  defendant  contends  that  the  signattire  of  all  three  commis- 
sioners was  necessary  in  order  to  make  the  bonds  a  binding  obli- 
gation. 

Held,  that  a  majority  of  a  board  of  public  agents  may  perform 
the  functions  entrusted  to  the  board,  although  the  rule  is  different 
as  to  private  agents. 

Royce,  J. 

It  seems,  at  common  law,  that  when  an  authority  is  conferred 
upon  several  it  is  sometimes  necessary  to  its  lawful  exercise  that 
all  should  act  together  and  all  concur  in  the  result,  while  under 
other  circumstances  the  decision  and  act  of  the  majority  is  good, 
provided  all  meet  and  deliberate,  or  have  notice  so  to  do;  and  in  yet 
other  cases  the  act  of  the  majority,  or  the  majority  of  the  quorum 
alone,  will  be  upheld.  In  the  case  at  bar  it  is  only  necessary  to  deduce 
from  the  authorities  which  of  the  first  two  named  rules  is  to  be 
here  applied. 

"If  the  authority,  in  a  matter  of  mere  private  concern,  be  con- 
fided to  more  than  one  agent,  it  is  requisite  that  all  join  in  the 
execution  of  the  power;  though  the  cases  admit  the  rule  to  be  different 
in  a  matter  of  public  trust;  and  if  all  meet  in  the  latter  case,  the  act 
of  the  majority  will  bind." 

The  rule  of  law  being  clearly  established,  and  the  distinctions 
clearly  and  sharply  defined,  it  only  remains  to  apply  them  to  the 
commissioners  in  the  case  at  bar.  Were  the  commissioners  provided 
for  by  the  Act  of  1867,  and  named  in  the  instrument  of  assent  of  the 


408  COMMERCIAL   LAW    CASES 

town  of  Mt.  Tabor,  private  agents,  or  clothed  with  a  power,  trust, 
or  authority  for  merely  private  purposes?  We  think  not.  They 
represented  no  party  or  interest  but  the  town,  which  is  a  public 
corporation,  and  the  inhabitants  thereof. 

3.     Liability  of  Joint  Principles. 

Daznson  v.  Holdcn.  33  Conn.  loj. 

This  suit  is  brought  by  the  plaintiffs  for  the  price  of  groceries 
sold  by  them  to  the  Bridgeport  Co-operative  Association,  an  unin- 
corporated society  of  which  Holden  was  president,  and  Tate,  treas- 
urer. The  Association  conducted  a  retail  meat-market  upon  co- 
operative principles,  and  although  it  sold  to  the  public  generally, 
its  primary  purpose  was  to  eliminate  middlemen's  profits  for  the 
members.  The  plaintiffs  seek  to  hold  the  defendants  as  members 
of  the  Association  who  have  atithorized  the  purchases. 

Held,  that  those  members  of  an  unincorporated  association 
wdio  have  authorized  the  incurring  of  an  indebtedness  by  agents 
of  the  association  are  liable  upon  it. 

Pardee,  J. 

The  determination  of  the  controversy  as  to  the  liability  of  the 
defendants  depends  not  at  all  upon  the  question  whether  they  and  the 
other  associated  individuals  were  partners  as  between  themselves; 
nor  upon  the  question  whether  as  between  all  of  the  associates  and 
strangers  they  were  such;  but  upon  the  law  of  agency.  If  the  de- 
fendants clothed  an  agent  with  unrestricted  authority  to  buy,  they 
must  pay,  regardless  of  the  other  questions. 

Upon  the  record  the  defendants,  with  others  undisclosed,  asso- 
ciated themselves  for  commercial  purposes,  for  their  pecuniary  ad- 
vantage. For  convenience  they  transacted  business  under  an  assumed 
associate  name;  sent  their  managers  and  agents  into  the  market  with 
unrestricted  authority  to  buy  goods  and  pledge  their  credit  under 
that  name;  to  buy  for  the  benefit  of  all  jointly  and  of  each  individ- 
ually. In  the  due  execution  of  the  authority  conferred  upon  them, 
they  contracted  the  debt  in  suit  and  pledged  the  joint  and  several 
credit  of  the  associates.  As  a  matter  of  law,  the  plaintiffs,  in  giv- 
ing credit  to  the  associate  name,  gave  credit  to  the  individuals  who 
upon  inquiry  should  be  found  to  .stand  behind  it. 

It  is  of  no  legal  significance  that  the  defendants  did  not  intend 
to  be  individually  responsible,  or  that  they  did  not  know  or  believe 
that  as  a  matter  of  law  they  would  be.  or  that  they  intended  that 
the  goods  when  bought  should  become  the  ]jroperty  of  the  association. 
Having  given  to  the  agent  unrestricted  authority  to  buy,  their  secret 
intent  as  to  the   ultimate  destination  of   the   merchandise   is  of   no 


.    AGENCY  409 

avail.  The  rule  that  he  who  instructs  his  agent  to  buy  can  be  made 
to  pay,  stands  quite  independent  of  intent  or  knowledge ;  he  who 
buys  by  an  agent  buys  by  himself,  and  the  law  imputes  to  him  knowl- 
edge that  he  must  pay,  and  the  corresponding  intent  to  pay,  for 
what  he  buys. 


4.     Relationship  by  Agreement. 

Central  Trust  Co.  v.  Bridges.  57  Fed.  755. 

Eager  was  president  and  principal  stockholder  of  the  Knoxville 
Southern  Railroad  Company  and  also  operated  a  Construction 
Company  which  had  a  contract  with  the  Railroad  Company  to  build 
part  of  its  road.  Suit  was  brought  by  a  mortgagee  of  the  road  to 
foreclose  the  mortgage.  Numerous  contractors  who  had  made 
construction  agreements  with  Eager  intervened,  claiming  liens 
on  the  ground  that  they  had  made  their  contracts  with  the  Railroad 
Company  as  principal  through  Eager  as  agent. 

Held,  that  the  relationship  of  principal  and  agent  must  be 
formed  by  an  intended  assumption  of  the  relationship. 

Taft,   Cir.  J. 

The  theory  upon  which  the  master  and  the  learned  court  below 
held  that  all  the  intervening  petitioners  dealt  directly  with  the  Knox- 
ville Southern  Railroad  Company  as  principal  contractors  was  that 
Eager  was  an  agent  of  the  railroad  company  in  making  the  contracts. 
One  may  be  liable  for  the  acts  of  another  as  his  agent  on  one  of 
two  grounds :  first,  because  by  his  conduct  or  statements  he  has  held 
the  other  out  as  his  agent;  or,  second,  because  he  has  actually  con- 
ferred authority  on  the  other  to  act  as  such. 

It  follows,  necessarily,  that  Eager  was  not  the  agent  of  the  com- 
pany in  contracting  with  the  petitioners  for  the  construction  of  the 
road,  unless  the  company  had  in  fact  conferred  authority  upon  him 
to  act  as  its  agent  in  the  matter.  An  agent  is  created — authority  is 
conferred — very  much  as  a  contract  is  made,  i.  e.,  by  an  agreement 
between  the  principal  and  agent  that  such  a  relation  shall  exist.  The 
minds  of  the  parties  must  meet  in  establishing  the  agency.  The 
principal  must  intend  that  the  agent  shall  act  for  him,  and  the  agent 
must  intend  to  accept  the  authority  and  act  on  it,  and  the  intention  of 
the  parties  must  find  expression  either  in  words  or  conduct  between 
them.  Now,  did  the  relation  in  fact  exist?  There  is  not,  anywhere 
in  the  proof,  a  single  circumstance  or  a  statement  that  either  the 
company  or  its  directors  intended,  or  that  Eager  intended,  his  rela- 
tion to  the  company  in  constructing  the  road  to  be  anything  other 
than  what  he  always  said  it  was,  and  what  the  petitioners  understood 
it  to  be, — that  of  principal  contractor. 


410  COMMERCIAL    LAW    CASES 

5.     Form  of   Authority:    Parol   Authority   to   Sign   Written 
Instrument. 

Johnson  v.  Dodge,   ij  III.   4J^. 

Iglehart,  as  agent  of  Dodge,  entered  into  a  written  agreement 
to  sell  Walters  certain  land  belonging  to  Dodge.  Walters  assigned 
his  rights  to  Johnson,  the  plaintiff,  who  sues  for  specific  perform- 
ance of  the  contract.  Dodge  defends  on  the  ground  that  Iglehart's 
oral  authority  was  insufficient. 

Held,  that  although  the  authority  must  be  exercised  in  writing, 
an  agent  may  be  appointed  orally. 

Skinner,  J. 

In  this  case,  the  contract,  if  Iglehart  had  authority  to  make  it, 
is  the  contract  of  Dodge  and  in  writing;  and  it  is  the  settled  con- 
struction of  the  statute  of  frauds,  that  the  authority  to  the  agent 
need  not  be  in  writing,  and  by  this  construction  we  feel  bound. 
Authority  from  Dodge  to  Iglehart  to  sell  the  land  included  the 
necessary  and  usual  means  to  make  a  binding  contract  in  the  name 
oi  the  principal.  If  the  authority  to  sell  may  be  created  by  parol, 
from  this  authority  may  be  implied  the  power  to  use  the  ordinary 
and  usual  means  of  effecting  a  valid  sale ;  and  to  make  such  sale 
it  was  necessary  to  make  a  writing  evidencing  the  same.  If  a 
party  is  present  at  the  execution  of  a  contract  or  deed,  to  bind  him 
as  a  party  to  it,  when  his  signature  is  affixed  by  another,  it  is  nec- 
essary that  the  person  so  signing  for  him  should  have  direct  authority 
to  do  the  particular  thing,  and  then  the  signing  is  deemed  his  personal 
act.  In  such  case  the  party  acts  without  the  intervention  of  an  agent 
and  uses  the  third  person  only  as  an  instrument  to  perform  the  mere 
act  of  signing.  This  is  not  such  a  case.  The  agent  was  authorized 
to  negotiate  and  conclude  the  sale,  and  for  that  purpose,  authority 
was  implied  to  do  for  his  principal  what  would  have  been  incumbent 
on  the  principal  to  do  to  accomplish  the  same  thing  in  person. 

The  mode  here  adopted  was  to  sign  the  name  of  Dodge  "by" 
Iglehart.  "his  agent."  and  it  is  the  usual  and  proper  mode  in  carry- 
ing out  an  authority  to  contract  conferred  on  an  agent.  But  if 
the  signing  the  name  of  the  principal  was  not  authorized  by  the 
authority  to  .sell,  yet  the  signature  of  the  agent  is  a  sufficient  signing 
under  the  .statute.  The  language  of  the  statute  is,  "signed  by  the 
party  to  be  charged  therewith  or  some  person  thereto  by  him  law- 
fully authorized."  If  Iglehart  had  authority  to  sign  Dodge's  name, 
then  the  contract  is  to  be  treated  as  signed  by  Dodge;  and  if  Igle- 
hart had  authority  to  sell,  in  any  view,  his  signature  to  the  contract 
is  a  signing  by  "some  other  person  thereto  by  him  lawfully  authorized," 
within  the  statute.  It  was  not  necessary  to  the  obligation  of  the 
contract  that  it  should  have  been  signed  by  the  vendee.  His  ac- 
ceptance and  possession  of  the  contract  and  payment  of  money  under 


AGENCY  411 

it.  are  unequivocal  evidences  of  his  concurrence,  and  constitute  him 
a  party  as  fully  and  irrevocably  as  his  signing  the  contract  could. 

6.  Form  of  Authority  to  Give  Sealed  Instrument. 

Long  V.  HartweU,  Administrator.  ^4  N.  J.  L.  it6. 

Piatt,  acting  tinder  parol  authority  for  Carpenter,  agreed  by  a 
contract  under  seal  to  sell  property  to  Long.  Long  sues  the  de- 
fendant, Carpenter's  administrator,  for  damages  for  the  non- 
performance of  this  contract.  The  defense  is  that  Piatt  had  no 
authority  to  make  a  contract  under  seal  in  behalf  of  Carpenter. 

Held,  that  although  an  agent's  authority  to  execute  a  contract 
under  seal  must  ordinarily  be  under  seal,  the  rule  does  not  apply 
when  the  contract  is  one  to  which  a  seal  is  not  necessary. 

Van  Syckcl,  J . 

The  authority  to  the  agent  to  execute  the  written  agreement  hav- 
ing been  by  parol,  it  is  insisted  that  it  does  not  bind  the  principal. 
Our  statute  of  frauds  does  not  require  tlie  agent's  authority  to  make 
a  contract  to  convey  land  to  be  in  writing ;  it  exacts  a  written  con- 
tract, not  a  written  power  to  the  agent.  The  distinction  is  clearly 
drawn  in  the  terms  of  the  statute,  between  conveying,  and  contracts 
to  convey,  land.  The  fact  that  the  contract  in  this  case  was  sealed 
by  the  agent  does  not  vitiate  it.  There  is  no  doubt  about  the  general 
rule  that  a  power  to  execute  an  instrument  under  seal  must  be  con- 
ferred by  an  instrument  of  equal  solemnity.  If  the  writing  given  by 
the  agent  be  under  seal,  and  that  be  essential  to  its  validity,  the 
authority  of  the  agent  must  be  of  equal  dignity,  or  it  cannot  operate. 
Here  a  seal  was  not  vital  to  the  contract ;  there  was  no  authority 
to  the  agent  to  attach  a  seal,  therefore  the  seal  is  of  no  value,  but 
the  power  to  execute  the  contract  without  seal  having  been  ample, 
so  far  it  becomes  the  act  of  the  principal,  and  inures  as  a  simple 
contract. 

7.  Instrument  Sealed  by  Agent  in  Presence  of  Principal. 

Gardner  v.  Gardner.  5  Cusli.   (Mass.)  483. 

Polly  Gwinn  gave  a  mortgage  deed  to  Burnell,  through  whom 
the  plaintiff,  who  now  attempts  to  foreclose,  claims.  The  defense 
is  that  Mary  Gardner,  who  signed  Polly  Gwinn's  name  to  the 
mortgage,  in  her  presence,  and  at  her  request,  did  not  have  author- 
ity under  seal  in  that  regard. 

Held,  that  when  an  act  is  performed  in  the  presence  of  the 
principal,  an  agent's  authority  to  sign  a  sealed  instrument  need  not 
be  sealed. 

Shaw,  C.  J. 

The  only  question  is  upon  the  sufficiency  of  the  execution  of  a 


412  COMMERCIAL    LAW    CASES 

mortgage  deed,  as  a  good  and  valid  deed  of  Polly  Gwinn.  The  execu- 
tion of  the  deed  is  objected  to,  on  the  ground  that  when  a  deed  is 
executed  by  an  agent  or  attorney,  the  authority  to  do  so  must  be  an 
authority  of  as  high  a  nature,  derived  from  an  instrument  under  the 
seal  of  the  grantor.  This  is  a  good  rule  of  law^,  but  it  does  not 
apply  to  the  present  case.  The  name  being  written  by  another 
hand,  in  the  presence  of  the  grantor,  and  at  her  request,  is  her  act. 
The  disposing  capacity,  the  act  of  mind,  which  are  the  essential  and 
efficient  ingredients  of  the  deed,  are  hers,  and  she  merely  uses  the 
hand  of  another,  through  incapacity  or  weakness,  instead  of  her  own, 
to  do  the  physical  act  of  making  a  written  sign.  Whereas,  in  ex- 
ecuting a  deed  by  attorney,  the  disposing  power,  though  delegated, 
is  with  the  attorney,  and  the  deed  takes  effect  from  his  act;  and 
therefore  the  power  is  to  be  strictly  examined  and  construed,  and 
the  instrument  conferring  it  is  to  be  proved  by  evidence  of  as 
high  a  nature  as  the  deed  itself.  To  hold  otherwise,  would  be  to 
decide  that  a  person  having  a  clear  mind  and  full  capacity,  but 
through  physical  inability  incapable  of  making  a  mark,  could  never 
make  a  conveyance  or  execute  a  deed;  for  the  same  incapacity  to 
sign  and  seal  the  principal  deed  would  prevent  him  from  executing 
a  letter  of  attorney  under  seal. 

It  appears  to  us  that  the  distinction  between  writing  one's  name 
in  his  presence  and  at  his  request,  and  executing  a  deed  by  attorney, 
is  obvious,  well  founded,  stands  on  satisfactory  reasons,  and  is 
well  sustained  by  authorities.  We  think  the  deed  was  well  executed 
by  Polly  Gwinn;  and  judgment  must  therefore  stand  for  the  de- 
fendant. 

8.     Authority  of  Agent  to  Fill  Blanks  in  Sealed  Instrument. 

White  V.  Duggan.    140  Mass.   18. 

This  was  a  suit  by  a  judge  of  the  Probate  Court  against  two 
sureties  on  a  probate  bond.  The  bond  had  been  signed  in  blank 
by  the  two  sureties  upon  representation  of  the  principal  that  the 
amount  was  to  be  $2,000.  It  was  in  fact  made  out  for  a  larger 
sum  required  by  the  Probate  Court.  The  sureties  contend  that  the 
unauthorized  completion  of  tlie  bond  relieves  them  of  any  obliga- 
tion upon  it. 

Held,  that  oral  authority  to  an  agent  to  fill  up  blanks  in  a  sealed 
instrument  is  sufficient. 

Holmes,  J. 

When  the  grantee  or  obligee  is  ignorant  of  the  order  in  which 
the  several  parts  oi  the  instrument  are  written,  and  the  delivery  to 
him  is  duly  authorized,  he  is  entitled  to  assume  that  the  instrument 
was  .so  written  as  lo  bind  the  grantor  or  obligor  from  whose  control 
it  comes.    Wc  should  add  that,  in  this  Commonwealth  at  least,  we  can- 


AGENCY  413 

not  question  for  an  instant  that  the  authority  to  deliver  merely  may 
be  given  by  parol.  To  admit  a  doubt  on  this  point  would  shake 
many  titles. 

If  we  are  to  interpret  the  bill  of  exceptions  more  favorably  for 
the  defendants  than  we  have  done  thus  far,  and  to  take  it  that  they 
only  authorized  the  bond  to  be  filled  in  with  a  penal  sum  of  $2,000 — 
and  even  if  we  take  the  further  step  of  assuming  that  limitation  to 
have  carried  with  it  the  understanding  between  them  and  the  principal 
that  they  only  assented  to  a  delivery  if  the  bond  was  filled  in  as  they 
expected  it  to  be — we  are  still  of  opinion  that  no  defense  is  made 
out.  We  are  aware  that  there  are  several  cases  more  or  less  opposed 
to  our  conclusion.  But  we  think  that  the  prevailing  tendency,  both 
in  this  state  and  elsewhere,  has  been  in  the  direction  we  have  taken. 

These  decisions  are  generally  put  on  the  ground  of  estoppel. 
It  has  been  debated  in  England  whether,  and  under  what  circum- 
stances, there  could  be  an  estoppel  by  negligence.  And  it  has  been 
admitted  that  there  might  be,  in  a  supposed  case  hardly  as  strong 
as  this.  A  specialty  deriving  its  validity  from  an  estoppel  in  pais 
is  perhaps  somewhat  like  Nebuchadnezzar's  image  with  a  head  of 
gold  supported  by  feet  of  clay.  But  if  the  case  is  properly  put  on 
that  ground,  then,  the  difference  between  intent  and  negligence,  in 
a  legal  sense,  is  ordinarily  nothing  but  the  difference  in  the  proba- 
bility, under  the  circumstances  known  to  the  actor  according  to  com- 
mon experience,  that  a  certain  consequence,  or  class  of  consequences, 
will  follow  from  a  certain  act,  and  it  follows  that  the  question  when 
an  estoppel  will  arise  is  simply  one  of  degree.  If,  on  the  other  hand, 
the  true  question  is  the  scope  of  the  principal's  authority  to  deliver 
the  bond — bearing  in  mind  that  an  authorized  delivery  will  cure 
defects  in  the  writing  of  the  bond,  that  the  authority  may  be  greater 
than  is  wished  by  the  obligor,  ostensible  authority  being  actual  au- 
thority— then  the  question  is  one  of  degree,  depending  on  the  particular 
circumstances,  just  as  the  same  question  is  in  tort.  All  that  we  have 
to  do  is  to  deal  with  the  case  before  us ;  and  it  will  serve  no  useful 
purpose  to  consider  whether,  if  the  surety  had  entrusted  the  bond  to 
the  principal,  with  no  authority  to  deliver  it  at  all,  or  whether,  if  he 
had  handed  a  blank  sheet  of  paper,  with  his  signature  and  seal  at  the 
bottom,  to  an  agent,  directing  him  to  deliver  it  filled  out  one  way,  and 
he  had  filled  it  out  in  an  entirely  dift'erent  way  and  delivered  it, 
such  cases  would  fall  on  one  or  the  other  side  of  the  line.  We  are  of 
opinion  that,  when  a  bond  such  as  this  is  entrusted  to  the  principal 
for  his  use,  to  fill  it  up  and  deliver  it,  the  possibility  of  his  being  re- 
quired by  the  probate  judge  to  insert  a  penal  sum  larger  than  the 
surety  directed,  and  of  his  doing  so,  is  so  obvious  and  so  near, 
that  the  surety  must  be  held  to  take  the  risk  of  his  principal's 
conduct,  and  is  bound  by  the  instrument  as  delivered,  although 
delivered  in  disobedience  of  orders,  if,  as  here,  the  obligee  had  no 
notice,  from  the  face  of  the  bond  or  otherwise,  of  the  breach  of 
orders.  To  hold  otherwise  would  be  to  disregard  the  habits  of  the 
community. 


414  COMMERCIAL    LAW    CASES 

B.     Ratification. 

I.     Definition. 

Keighley  v.  Durant.  (iQOi)  A.  C.  (Eng.)  240. 

Keighley,  Maxsted  &  Company  authorized  Roberts,  a  corn 
merchant,  to  buy  wheat  on  joint  account  for  himself  and  them  at  a 
certain  price.  Roberts  was  unable  to  make  the  purchase  at  that 
price,  but  afterwards  purchased  at  a  higher  price  in  his  own  name, 
intending  the  transaction  to  be  on  joint  account.  To  this, 
Keighley,  Maxsted  &  Company  assented.  Durant,  with  whom  the 
agreement  for  the  purchase  of  the  corn  was  made  by  Roberts,  sues 
Keighley,  Maxsted  &  Company  for  failure  to  accept  delivery  of 
the  wheat. 

Held,  that  in  order  to  bind  a  principal  upon  a  ratification,  he 
must  be  disclosed  at  the  time  of  the  making  of  the  contract. 

Lord  MocnagJitcn: 

As  a  general  rule,  only  persons  who  are  parties  to  a  contract, 
acting  either  by  themselves  or  by  an  authorized  agent,  can  sue 
or  be  sued  on  the  contract.  A  stranger  cannot  enforce  the  contract, 
nor  can  it  be  enforced  against  a  stranger.  That  is  the  rule ;  but 
there  are  exceptions.  The  most  remarkable  exception,  I  think, 
results  from  the  doctrine  of  ratification  as  established  in  the  English 
law.  That  doctrine  is  thus  stated :  "That  an  act  done,  for  another, 
by  a  person,  not  assuming  to  act  for  himself,  but  for  such  other 
person,  though  without  any  precedent  authority  whatever,  becomes 
the  act  of  the  principal,  if  subsequently  ratified  by  him,  is  the  known 
and  well-established  rule  of  law.  In  that  case  the  principal  is  bound 
by  the  act,  whether  it  be  for  his  detriment  or  his  advantage,  and 
whether  it  be  founded  on  a  tort  or  on  a  contract,  to  the  same  effect 
as  by.  and  with  all  the  consequences  which  follow  from,  the  same 
act  done  by  his  previous  authority."  And  so  by  a  wholesome  and 
convenient  fiction,  a  person  ratifying  the  act  of  another,  who,  with- 
out authority,  has  made  a  contract  openly  and  avowedly  on  his  behalf, 
is  deemed  to  be,  though  in  fact  he  was  not,  a  party  to  the  contract. 
Does  the  fiction  cover  the  case  of  a  person  who  makes  no  avowal  at 
all,  but  assumes  to  act  for  himself  and  for  no  one  else?  If  the 
statement  of  tiie  law  is  accurate,  it  would  seem  to  exclude  the  case 
of  a  person  who  may  intend  to  act  for  another,  but  at  the  same  time 
keeps  his  intention  locked  up  in  his  own  breast;  for  it  cannot  be 
said  that  a  person  who  so  conducts  himself  does  assume  to  act  for 
anybody  but  himself.  But  ought  the  doctrine  of  ratification  to  be 
extended  to  such  a  case?  On  principle  1  should  say,  certainly  tiot. 
It  is,  I  think,  a  well-established  principle  in  English  law  that  civil 
obligations  arc  not  to  be  created   b^',  or   founded  upon,   undisclosed 


AGENCY  ■  415 

intentions.  That  is  a  very  old  principle.  Lord  Blackburn  traces  it 
back  to  the  year-books  of  Edward  IV.  and  to  a  quaint  judgment  of 
Brian,  C.  J. :  "It  is  common  learning,"  said  that  Chief  Justice,  who 
was  a  great  authority  in  those  days,  "that  the  thought  of  a  man  is 
not  triable,  for  the  Devil  has  not  knowledge  of  man's  thoughts." 
It  is,  I  think,  a  sound  maxim — at  least,  in  its  legal  aspect :  and  in 
my  opinion  it  is  not  to  be  put  aside  or  disregarded  merely  because 
it  may  be  that,  in  a  case  like  the  present,  no  injustice  might  be 
done  to  the  actual  parties  to  the  contract  by  giving  effect  to  the 
undisclosed  intentions  of  a  would-be   agent. 

Lord  Lindley: 

Had  Keighley,  Maxsted  &  Company  authorized  Roberts  to  buy 
for  them,  there  would  have  been  a  contract  in  fact,  although  Durant 
&  Company  did  not  know  of  them  and  did  not  intend  to  sell  to 
them.  This  is,  no  doubt,  an  anomaly ;  but  there  is  a  reality  behind 
it.  To  apply  the  same  sort  of  reasoning  to  a  different  state  of 
facts  from  which  the  reality  is  absent  is  to  go  further  than  any 
existing  authority,  and  to  extend  a  fiction  further  than  is  required 
by  those  necessities  or  conveniences  of  trade  which  led  to  its  in- 
troduction. 


2.     What  Constitutes  Ratification. 

McCracken  v.  The  City  of  San  Francisco.  16  Cal.  59/. 

The  city  of  San  Francisco  passed  Ordinance  481  authorizing 
the  sale  of  certain  property  belonging  to  the  city.  McCracken 
bought  this  property,  but  now  seeks  to  recover  the  money  paid  on 
account,  as  the  ordinance  authorizing  the  sale  was  invalid,  for  the 
reason  that  it  was  not  passed  by  a  majority  vote  of  the  council. 
The  city  contends  that  it  has  ratified  the  sale  by  other  ordinances 
properly  passed,  dealing  with  the  money  received  from  the  sale. 

Held,  that  ratification  must  be  made  with  intent  to  ratify. 

Field,  C.J. 

To  determine  the  effect  of  these  acts,  as  a  ratification  of  the 
sale,  it  is  necessary  to  consider  the  conditions  essential  to  a  valid 
ratification.  To  ratify,  is  to  give  validity  to  the  act  of  another. 
A  ratification  is  equivalent  to  a  previous  authority.  It  operates  upon 
the  act  ratified  in  the  same  manner  as  though  the  authority  had  been 
originally  given.  It  follows  as  a  consequence,  that  where  the  authority 
can  originally  be  conferred  only  in  a  particular  form  or  mode,  the 
ratification  must  follow  the  same  form  or  mode.  Thus,  if  an  authority 
to  execute  a  deed  of  a  private  person  must  be  under  seal,  the  ratifica- 
tion of  the  deed  must  be  also  under  seal;  and  where  an  authority  to 
do  any  particular  act  on  the  part  of  a  corporation  can  only  be  con- 


4l6  COMMERCIAL    LAW    CASES 

f erred  by  ordinance,  a  ratification  of  such  act  can  only  be  by 
ordinance. 

It  follows,  also,  from  the  general  doctrine,  that  a  ratification  is 
equivalent  to  a  previous  authority,  that  a  ratification  can  only  be 
made  when  the  principal  possesses  at  the  time  the  power  to  do  the 
act  ratified.  He  must  be  able  at  the  time  to  make  the  contract  to 
which  by  his  ratification  he  gives  validity.  The  ratification  is  the 
first  proceeding  by  which  he  becomes  a  party  to  the  transaction, 
and  he  cannot  acquire  or  confer  the  rights  resulting  from  that  trans- 
action, unless  in  a  position  to  enter  directly  upon  a  similar  transaction 
himself.  Thus,  if  an  individual,  pretending  to  be  the  agent  of 
another,  should  enter  into  a  contract  for  the  sale  of  land  of  his 
assumed  principal,  it  would  be  impossible  for  the  latter  to  ratify  the 
contract,  if  between  its  date  and  the  attempted  ratification  he  had 
himself  disposed  of  the  property.  He  could  not  defeat  the  inter- 
mediate sale  made  by  himself,  and  impart  validity  to  the  sale  made 
by  the  pretended  agent,  for  his  power  over  the  property  or  to  con- 
tract for  its  sale  would  be  gone. 

If  we  apply  these  principles  to  the  case  at  bar,  the  question  of 
ratification  will  be  one  of  easy  solution. 

There  is  nothing  in  the  appropriation  from  which  an  intention 
to  ratify  the  sale  can  be  implied;  and  if  the  intention  to  ratify  under 
some  circumstances  could  be  thus  implied,  the  implication  would  be 
of  no  avail  in  the  present  case,  since  it  is  manifest  that  the  Common 
Council  were  at  the  time  laboring  under  the  mistaken  impression 
that  Ordinance  481  had  become  law.  Ratification,  to  be  effective, 
must  be  made  with  full  knowledge  of  all  the  facts  relating  to  the  act 
ratified.  To  entitle,  therefore,  any  proceedings  of  the  Common  Coun- 
cil to  the  slightest  consideration  as  evidence  of  ratification,  it  must 
be  shown  that  those  proceedings  were  taken  with  full  knowledge  that 
the  ordinance  had  never  passed,  and  that  the  sale  thereunder  was  an 
absolute  nullity. 

3.     Necessity  of  Ratification  or  Disaffirmance. 

Heyn  v.   O'llagen.   60  Mich.   1^0. 

A  shoemaker  living  in  Marquette  represented  to  Heyn  that 
he  was  in  the  employ  of  O'Hagen,  and  upon  that  representation. 
had  goods  shipi)ed  to  the  former  place  of  business  of  O'Hagen, 
which  lie  himself  then  occupied.  Heyn  sent  an  invoice  of  the 
goods  to  O'llagen,  who  asked  the  shoemaker  about  the  circum- 
stances. Ui)on  finding  out  that  the  transaction  was  fraudulent, 
O'Hagen  nevertheless  said  nothing  to  Heyn  until  Heyn  called  on 
him  for  payment.  Nothing  more  was  done  until  some  time  later, 
when  hdth  Heyn  and  O'Hagen  went  to  the  store  of  the  shoemaker 
where  they  made  a  tentative  adjustment  which  was  not  carried 
ihrougli.     Heyn  in  this  suit  contends  that  O'Hagen  has  ratified 


AGENCY  417 

the  acts  of  the  shoemaker  by  faihng  to  disaffirm  upon  notification. 
Held,  that  a  person  must  ratify  or  disaffirm  within  a  reasonable 
time  after  notice. 

Champlin,  J . 

The  principle  is  well  established,  "That  if  a  man  either  by- 
word or  by  conduct  has  intimated  that  he  consents  to  an  act  which 
has  been  done,  and  that  he  will  offer  no  opposition  to  it,  although 
it  could  not  lawfully  have  been  done  without  his  consent,  and  he 
thereby  induces  them  to  do  that  from  which  they  otherwise  might 
have  abstained,  he  cannot  question  the  legality  of  the  act  he  has  so 
sanctioned,  to  the  prejudice  of  those  who  have  so  given  faith  to  his 
words,  or  to  the  fair  inference  to  be  drawn  from  his  conduct." 

But  there  can  be  no  estoppel  unless  the  plaintiff  was  induced  to 
take  some  action  in  reliance  upon  the  statement  or  conduct  of  the 
defendant  which  otherwise  he  would  not  have  taken,  and  which 
operated  to  his  prejudice. 

Under  the  facts  found,  the  question  is  clear  to  me  that  the  de- 
fendant has  ratified  the  act  of  the  shoemaker  in  ordering  the  goods 
in  the  name  of  the  defendant.  "To  ratify  is  to  give  sanction  and 
validity  to  something  done  without  authority  by  one  individual  on 
behalf  of  another."  Ratification  may  be  express  or  implied.  When 
there  is  no  express  ratification,  the  facts  and  circumstances  from 
which  a  ratification  may  be  inferred  must  be  such  as  are  inconsistent 
with  a  dift'erent  intention.  Here  the  ratification,  if  any  exist,  must  be 
inferred  from  the  silence  of  defendant,  and  his  neglect  to  inform  the 
plaintiff  that  he  had  not  authorized  the  shoemaker  to  purchase  goods 
on  his  credit,  or  to  order  them  in  his  name,  after  he  was  fully 
informed  of  the   facts. 

In  considering  whether  the  facts  and  circumstances  of  a  par- 
ticular case  are  sufficient  evidence  of  a  ratification,  the  distinction 
has  been  made  between  the  unauthorized  act  of  an  agent  where  the 
relation  of  principal  and  agent  already  exists,  and  that  of  a  mere 
volunteer  or  stranger.  In  the  former  case  it  is  said  that  an  inten- 
tion to  ratify  will  always  be  presumed  from  the  silence  of  the  prin- 
cipal after  being  informed  of  what  has  been  done  on  his  account, 
while  in  the  latter  case  it  has  been  said  there  exists  no  obligation  to 
repudiate  the  transaction,  nor  will  silence  be  construed  into  a  ratifi- 
cation. 

Whether  silence  operates  as  presumptive  proof  of  ratification  of 
the  act  of  a  mere  volunteer,  must  depend  upon  the  particular  cir- 
cumstances of  the  case.  If  those  circumstances  are  such  that  the 
inaction  or  silence  of  the  party  sought  to  be  charged  as  principal 
would  be  likely  to  cause  injury  to  the  person  giving  credit  to,  and 
relying  upon,  such  assumed  agency,  or  to  induce  him  to  believe  such 
agency  did  in  fact  exist,  and  to  act  upon  such  belief  to  his  detriment, 
then  such  silence  or  inaction  may  be  considered  as  a  ratification  of 
the  agency. 


4l8  COMMERCIAL    LAW    CASES 

"The  rule  as  to  what  amounts  to  a  ratification  of  an  unauthorized 
act  is  elementary,  and  may  be  stated  thus :  When  a  person  assumes 
in  good  faith  to  act  as  agent  for  another  in  a  given  transaction, 
but  acts  without  authority,  whether  the  relation  of  principal  and  agent 
does  or  does  not  exist  between  them,  the  person  in  whose  behalf  the 
act  was  done,  upon  being  fully  informed  thereof,  must,  within  a 
reasonable  time,  disaffirm  the  act,  at  least  in  cases  where  his  silence 
might  operate  to  the  prejudice  of  innocent  parties,  or  he  will  be 
held  to  have  ratified  such  unauthorized  act." 

The  qualification  of  good  faith  is,  it  seems  to  me,  unnecessary 
in  the  person  who  assumes,  without  authority,  to  act  as  agent.  If 
the  person  with  whom  he  deals  as  agent  acts  in  good  faith,  and  with 
reasonable  care,  the  act  is  capable  of  being  ratified  by  the  person 
on  whose  behalf  such  pretended  agent  assumes  to  act,  whether  the 
agent  himself  acts  bona  fide  or  mala  fide. 

In  this  case  the  direct  results  of  the  silence  of  defendant,  and 
his  neglect  to  inform  plaintiff  in  a  reasonable  time  after  he  was 
fully  informed  of  what  had  been  done,  was  to  lead  plaintiff  into 
the  belief  that  the  shoemaker  was  in  fact  the  agent  of  defendant, 
and  caused  the  plaintiff  to  seL  to  defendant,  as  he  supposed,  another 
invoice  of  goods,  which  he  sent  to  defendant  by  express,  and  [he] 
also  mailed  to  him  the  invoice  of  the  second  bill,  which  defendant 
received.  Here,  by  his  silence,  [the  defendant]  permitted  this  shoe- 
maker, whose  name  neither  the  plaintiff  nor  defendant  knows,  to 
defraud  the  plaintiff  by  pretending  to  act  for  and  on  his  behalf. 
Under  these  circumstances,  defendant,  by  his  silence  and  tacit  ac- 
quiescence in  the  conduct  of  the  shoemaker,  must  be  held  to  have 
ratified  the  agency. 

4.     Consideration  for  Ratification  Unnecessary. 

Grant  v.  Beard.  50  N.  H.  12^. 

The  defendants'  father  brought  wagons  belonging  to  them  to 
Grant  to  be  repaired.  Grant  seeks  the  amount  of  his  bill  for  the 
repairs,  claiming  that  the  defendants  ratified  the  contract  made  on 
their  behalf  l)y  their  father.  The  court  instructed  the  jury  to  the 
effect  that  the  defendants  nuist  receive  some  benefit  from  the 
repairs. 

Held,  that  uj)()n  ratification,  a  contract  becomes  efifective  with- 
out regard  lo  the  benetit  secured  under  it. 

foster,  J . 

The  ratification,  ujjon  full  knowledge  of  all  the  circumstances 
of  the  case,  of  an  act  done  by  one  who  assumes  to  be  an  agent,  is 
equivalent  to  a  prior  authority.  By  such  ratification  the  party  will 
be  bound  as  fully,  to  all  intents  and  purjjoses,  as  if  he  had  originally 
given   exjjress  authority  or   direction  concerning  the   act. 


AGENCY  419 

A  parol  contract  may  be  ratified  by  an  express  parol  recog- 
nition of  the  act,  or  by  conduct  implying  acquiescence,  or  by  silence 
when  the  party,  in  good  faith,  ought  to  speak.  And  so  the  principal 
may  be  estopped  to  deny  the  agent's  original  authority. 

Such  ratification  relates  back  to  and  incorporates  the  original 
contract  or  transaction,  so  that,  as  between  the  parties,  their  rights 
and  interests  are  to  be  considered  as  arising  at  the  time  of  the  original 
act,  and  not  merely  from  the  date  of  the  ratification;  and  a  suit  to 
enforce  the  obligation  assumed  by  the  party  who  ratifies,  is,  to  all 
intents  and  purposes,  a  suit  founded  upon  the  original  act  or  contract, 
and  not  on  the  act  of  ratification. 

Therefore  the  original  consideration  applies  to  the  ratification, 
thus  made  equivalent  to  an  original  contract,  and  supports  the 
implied  promise  upon  which  the  present  action  is  founded. 

The  ratification  operates  directly,  and  not  merely  as  presumptive 
evidence  that  the  act  was  originally  done  by  the  authority  of  the 
defendants;  and  therefore  it  is  unnecessary  to  consider  whether  or 
not  the  evidence  tends  to  show  an  original  authority.  The  subse- 
quent assent  is,  per  sc,  a  confirmation  of  the  agent's  act;  and  there 
is  no  valid  distinction  between  a  ratification  of  the  agent's  act,  and 
a  direct  and  original  promise  to  pay  for  the  services  rendered  by  the 
plaintiff.  Wherever  there  would  have  been  a  consideration  for 
the  original  engagement  if  no  agent  or  party  assuming  to  act  as 
agent  had  intervened,  such  original  consideration  is  sufficient  to  sus- 
tain the  act  of  ratification. 

In  none  of  the  cases  cited  is  the  subject  of  a  new  consideration 
to  support  the  ratification  alluded  to  as  necessary;  but  the  logical 
deduction  from  the  principle  that  the  ratification  relates  back  to  and 
covers  the  original  agreement  is  wholly  inconsistent  with  such  a 
proposition;  and  the  contrary  doctrine  is  expressly  held  in  numerous 
cases. 

5.     Foran  of  Ratification. 

MavLean  v.  Dunn.  4  B'uig.    (Eng.)   J22. 

MacLean  sold  Russian  wool  to  Dunn's  firm,  the  defendants, 
receiving  in  exchange  as  part  of  the  purchase  price,  an  amount 
of  Spanish  wool.  This  transaction  was  effected  by  Ebsworth.  a 
broker,  who  gave  "bought  and  sold"  notes  for  both  parties  with- 
out authority  from  the  defendants,  but  later  they  orally  ratified 
the  transaction.  In  a  suit  for  breach  of  the  contract  brought  by 
MacLean,  the  defense  is  set  up  that  ratification  of  this  contract, 
originally  within  the  statute  of  frauds  because  of  the  amount  of 
the  purchase  price  involved,  should  have  been  made  by  a  written 
instrument. 

Held,  that  a  contract  required  by  the  statute  of  frauds  to  be 
in  writing  may  be  ratified  orally. 


420  COMMERCIAL    LAW    CASES 

Best,  C.  J. 

It  has  been  argued  that  the  subsequent  adoption  of  the  contract 
by  Dunn  will  not  take  this  case  out  of  the  operation  of  the  statute 
of  frauds;  and  it  has  been  insisted  that  the  agent  should  have  his 
authority  at  the  time  the  contract  is  entered  into.  If  such  had  been 
the  intention  of  the  legislature,  it  would  have  been  expressed  more 
clearly;  but  the  statute  only  requires  some  note  or  memorandum  in 
writing,  to  be  signed  by  the  party  to  be  charged,  or  his  agent  there- 
unto lawfully  authorized;  leaving  us  to  the  rules  of  common  law, 
as  to  the  mode  in  which  the  agent  is  to  receive  his  authority.  Now, 
in  all  other  cases,  a  subsequent  sanction  is  considered  the  same  thing 
in  effect  as  assent  at  the  time,  and  in  my  opinion,  the  subsequent 
sanction  of  a  contract  signed  by  an  agent,  takes  it  out  of  the  opera- 
tion of  the  statute  more  satisfactorily  than  an  authority  given 
beforehand.  Where  the  authority  is  given  beforehand,  the  party 
must  trust  to  his  agent;  if  it  be  given  subsequently  to  the  contract, 
the  party  knows  that  all  has  been  done  according  to  his  wishes. 
But  where  a  broker,  who  signed  a  broker's  note  upon  a  sale  of  corn, 
was  the  seller's  agent,  Lord  Ellenborough  held  that  if  the  buyer 
acted  upon  the  note,  that  was  such  an  adoption  of  his  agency  as 
made  his  note  sufficient  within  the  statute  of  frauds :  and  where  A. 
and  B.,  being  jointly  interested  in  a  quantity  of  oil,  A.  entered  into 
a  contract  for  the  sale  of  it,  without  the  authority  or  knowledge  of 
B.,  who,  upon  receiving  information  of  the  circumstance,  refused  to 
be  bound,  but  afterwards  assented  by  parol,  and  samples  were  de- 
livered to  the  vendees;  it  was  held,  in  an  action  against  the  vendees, 
that  B.'s  subsequent  ratification  of  the  contract  rendered  it  binding, 
and  that  it  was  to  be  considered  as  a  contract  in  writing  within  the 
statute  of  frauds.  That  is  an  express  decision  on  the  point,  that 
under  the  statute  of  frauds  the  ratification  of  the  principal  relates 
back  to  the  time  when  the  agent  made  the  contract. 

6.     Form  of  Ratification  of  Sealed  Contract. 

Mclntyrc  v.  Park,  ii  Gray  (Mass.)  102. 

Mclntyre  sues  for  nonperformance  of  an  indenture  wherein 
he  agreed  to  convey  his  store  and  stock  in  trade  to  Park,  Castle 
and  Young,  who  agreed  to  pay  a  s])ecilied  price  therefor.  Castle 
prepared  the  indcnttn^e  and  signed  the  name  of  Park,  the  de- 
fendant, in  liis  absence.  Subse(|uently  Park  consented  to  be  bound 
by  the  writing  and  both  sides  treated  it  as  a  valid  contract. 

Held,  that  a  sealed  instrument  may  be  orally  ratified  in  Massa- 
chusetts. 

Mrlralf,  J. 

The  evidence  of  the  defendant's  ratification  or  adoption  of  the 
agreement  executed  in   his  name   was   rightly  admitted;   and   he,  by 


AGENCY  421 

such  ratification  or  adoption,  became  answerable  for  a  breach  of  that 
agreement.  The  agreement  was  under  seal;  and  the  defendant  con- 
tends that  a  sealed  instrument,  executed  without  previous  autliority, 
can  be  ratified  only  by  an  instrument  under  seal.  By  the  law  of 
Massachusetts  such  instrument  may  be  ratified  by  parol.  The  cases 
in  which  this  doctrine  has  been  adjudged  were  those  in  which  one 
partner,  without  the  previous  authority  of  his  copartners,  executed 
a  deed  in  the  name  of  the  firm.  But  we  do  not  perceive  any  reason 
for  confining  the  doctrine  to  that  class  of  cases. 

7,     Necessity  of  Existence  of  Principal  at  Time  of  Act  Rati- 
fied. 

McArthiir  v.  Times  Printing  Company.  48  Minn.  ^ip. 

Before  the  Times  Printing  Company  was  incorporated,  the 
promoters  made  an  agreement  wath  McArthur  on  its  behalf, 
whereby  McArthur  contracted  to  work  for  the  company  and 
solicit  advertisements  for  it  for  a  year,  in  consideration  of  a 
certain  weekly  salary  and  five  shares  of  the  stock  of  the 
company.  After  McArthur  had  been  employed  for  some  time, 
hs  was  discharged,  and  he  now  brings  suit  against  the  cor- 
poration for  breach  of  contract.  The  defense  is,  in  part,  based 
upon  want  of  authority  by  the  promoters  to  contract  for  the 
company. 

Held,  that  although  a  principal  not  yet  in  existence  cannot 
ratify  a  contract  made  on  his  behalf,  he  may  adopt  the  transaction 
as  his  own, 

Mitchell  J. 

There  is  a  line  of  cases  which  hold  that  where  a  contract  is 
made  in  behalf  of,  and  for  the  benefit  of,  a  projected  corporation, 
the  corporation,  after  its  organization,  cannot  become  a  party  to 
the  contract,  either  by  adoption  or  ratification  of  it.  This,  however, 
seems  to  be  more  a  question  of  name  than  of  substance ;  that  is, 
whether  the  liability  of  the  corporation,  in  such  cases,  is  to  be  placed 
on  the  grounds  of  its  adoption  of  the  contract  of  its  promoters, 
or  upon  some  other  ground,  such  as  equitable  estoppel.  This  court, 
in  accordance  with  what  we  deem  sound  reason  as  well  as  the  weight 
of  authority,  has  held  that,  while  a  corporation  is  not  bound  by 
engagements  made  on  its  behalf  by  its  promoters  before  its  organiza- 
tion, it  may,  after  its  organization,  make  such  engagements  its  own 
contracts.  And  this  it  may  do  precisely  as  it  might  make  similar 
original  contracts;  formal  action  of  its  board  of  directors  being 
necessary  only  where  it  would  be  necessary  in  the  case  of  a  similar 
original  contract.  That  it  is  not  requisite  that  such  adoption  or  ac- 
ceptance be  expressed,  but  it  may  be  inferred  from  acts  or  acquies- 


422  COMMERCIAL    LAW    CASES 

cence  on  part  of  the  corporation  or  its  authorized  agents,  as  any 
similar  original  contract,  might  he  shown.  The  right  of  the  cor- 
porate agents  to  adopt  an  agreement  originally  made  by  promoters 
depends  upon  the  purposes  of  the  corporation  and  the  nature  of  the 
agreement.  Of  course,  the  agreement  must  be  one  which  the  cor- 
j.'oration  itself  could  make  and  one  which  the  usual  agents  of  the 
company  have  express  or  implied  authority  to  make.  That  the 
contract  in  this  case  was  of  that  kind  is  very  clear;  and  the  acts  and 
acquiescence  of  the  corporate  officers,  after  the  organization  of  the 
company,  fully  justified  the  jury  in  finding  that  it  had  adopted  it  as 
its  own. 

The  defendant,  however,  claims  that  the  contract  was  void  under 
the  statute  of  frauds,  because,  "by  its  terms,  not  to  be  performed 
within  one  year  from  the  making  thereof."  This  proceeds  upon 
the  erroneous  theory  that  the  act  of  the  corporation,  in  such  cases, 
is  a  ratification  which  relates  back  to  the  date  of  the  contract  with 
the  promoter,  under  the  familiar  maxim  that  "a  subsequent  ratifica- 
tion has  a  retroactive  effect,  and  is  equivalent  to  a  prior  command." 
But  the  liability  of  the  corporation,  under  such  circumstances,  does 
not  rest  upon  any  principle  of  the  law  of  agency,  but  vipon  the 
immediate  and  voluntary  act  of  the  company. 

Although  the  acts  of  a  corporation  with  reference  to  the  con- 
tracts made  by  promoters  in  its  behalf  before  its  organization  are 
frequently  loosely  termed  "ratification,"  yet  a  "ratification,"  prop- 
erly so  called,  implies  an  existing  person,  on  whose  behalf  the  con- 
tract might  have  been  made  at  the  time.  There  cannot,  in  law,  be 
a  ratification  of  a  contract  which  could  not  have  been  made  binding 
on  the  ratifier  at  the  time  it  was  made,  because  the  ratifier  was 
not  then  in  existence.  What  is  called  "adoption,"  in  such  cases, 
is,  in  legal  effect,  the  making  of  a  contract  of  the  date  of  the  adop- 
tion, and  not  as  of  some  former  date.  The  contract  in  this  case 
was,  therefore,  not  within  the  statute  of  frauds. 


8.     Knowledge  of  Facts  Necessary  to  Ratification. 

Kelly  V.  Newbury  port  Horse  Railroad  Co.  141  Mass.  4^6. 

The  railroad  gave  to  two  of  its  directors  certain  notes,  oriij;!- 
nally  voidable,  wdiich  were  afterwards  indorsed  to  the  plaintiff, 
who  holds  as  an  assij^ncc.  In  a  suit  on  these  notes,  the  plaintiff 
insists  tiiat  the  corporation  ratified  them  and  that  they  are  conse- 
((uently  bindinjf  oljligations.  The  defendant  contends  that  its 
recoj^niti(ni  of  the  notes  as  valid  obligations  was  without  knowledge 
that  the  notes  were  originally  voidable. 

Held,  that  while  ratification  must  he  made  with  knowledge  of 
facts,  it  is  not  essential  to  ratification  that  the  party  ratif\ing 
know  the  law  concerning  the  original  (ibligation. 


AGENCY  423 

Allen,  J. 

The  request  sought  to  incorporate  into  the  doctrine  of  ratifica- 
tion a  new  element,  namely,  that,  in  order  to  make  a  valid  ratifica- 
tion, the  principal  must  have  known  not  only  all  the  facts  hut  also 
the  legal  effect  of  the  facts,  and  then,  with  a  knowledge  hoth  of 
the  law  and  facts,  have  ratified  the  contracts  hy  some  independent 
and  substantive  act.  This  request  was  properly  refused.  It  is  suf- 
ficient if  a  ratification  is  made  with  a  full  knowledge  of  all  the 
material  facts.  Indeed,  a  rule  somewhat  less  stringent  than  this  may 
properly  be  laid  down,  when  one  purposely  shuts  his  eyes  to  means 
of  information  within  his  own  possession  and  control,  and  ratifies 
an  act  deliberately,  having  all  the  knowledge  in  respect  to  it  which 
he  cares  to  have. 

9.     Ratification  of  Entire  Contract  Necessary. 

ShonUiycr  z'.  Pcahody.  57  Conn.  42. 

Day,  the  general  agent  of  the  plaintiffs,  sold  a  piano  to  Peabody, 
a  stockbroker,  for  $300,  agreeing  that  the  price  should  be  paid  out 
of  commissions  to  be  earned  by  Peabody  in  trading  for  the  benelit 
of  Day.  Day  afterwards  absconded,  and  the  plaintiffs  sue  for  the 
price. 

Held,  that  the  plaintififs  cannot  ratify  part  of  the  contract 
without  ratifying  the  whole. 

Loomis,  J. 

The  manifest  wrong  and  injustice  perpetrated  upon  the  plaintifTs 
by  the  defendant  and  Day,  make  us  regret  that  the  principles  of  law 
applicable  to  the  remedy  chosen  by  the  plaintiffs  are  not  flexible 
enough  to  aft'ord  relief.  But  the  greatest  good  to  the  greatest  number 
requires  adherence  to  sound  general  principles,  even  though  in  a 
given  case  a  party  may  fail  in  obtaining  redress.  The  whole  trouble 
in  this  case  arises  from  a  mistake  as  to  the  plaintiff's  remedy. 

When  the  plaintiffs  were  informed  of  the  terms  of  the  contract 
made  by  their  agent  for  the  sale  of  the  piano  to  the  defendant,  they 
had  an  election  to  repudiate  the  arrangement,  and  by  tendering  back 
w^hat  they  had  received  in  ignorance  of  the  terms  of  the  sale,  and 
demanding  the  piano,  they  could  have  recovered  it  by  an  action  of 
replevin,  or  obtained  its  value  in  trover.  But,  knowing  the  terms 
of  the  sale,  they  elected  to  sue  in  assumpsit  on  the  contract  for  the 
agreed  price,  and  thereby  they  affirmed  the  contract  and  ratified 
the  act  of  the  agent,  precisely  as  if  it  had  been  expressly  approved 
upon  being  reported  to  them  by  the  agent  or  the  defendant;  and  in 
contemplation  of  law  a  subsequent  ratification  and  adoption  of  an 
act  has  relation  back  to  the  time  of  the  act  and  is  tantamount  to 
a  prior  command. 


424  COMMERCIAL    LAW    CASES 

The  argument  for  the  plaintiffs  (though  it  is  not  so  stated) 
seems  really  to  involve  the  fallacious  assumption  that  the  plaintiffs 
could  affirm  the  contract  in  part  and  repudiate  it  in  part,  that  is, 
that  the  contract  is  to  be  treated  as  good  for  the  agreed  price,  but 
bad  as  to  the  agreed  mode  of  payment.  But  the  law  requires  a  con- 
tract to  be  affirmed  or  repudiated  in  its  entirety. 

There  was  no  contract  at  all  relative  to  the  piano  except  the 
one  made  by  Day  as  their  agent,  and  v/hen  the  plaintiffs,  knowing 
the  facts,  sued  on  that  contract,  they  affirmed  it  in  every  essential 
particular  both  as  to  price  and  as  to  the  terms  of  paying  the  price. 

10.     Intervening  Rights  of  Third  Parties. 

Pollock  V.   Cohen.  J2   Oh.  St.   514. 

Pollock,  to  whom  Bornstien  owed  money,  sent  Schloss  to  col- 
lect it.  Schloss,  in  order  to  obtain  satisfaction  of  the  debt,  but  in 
excess  of  authority,  bought  out  Bornstien's  business  for  Pollock, 
agreeing  to  pay  a  certain  sum  over  the  indebtedness.  Pollock 
ratified  the  transaction.  In  the  meantime,  Cohen  attached  the 
business  on  a  debt  due  him.  Pollock  brings  this  action  to  recover 
the  goods  so  attached. 

Held,  that  ratification  cannot  be  made  in  such  a  way  as  to  cut 
ofif  the  intervening  rights  of  third  parties. 

Ashburn,  J. 

The  rule  is,  where  an  agent,  in  the  transaction  of  the  business, 
has  exceeded  his  authority,  and  his  principal,  with  a  full  knowledge 
of  the  circumstances,  deliberately  ratifies  the  unauthorized  acts 
of  his  agent,  the  ratification  reaches  back  to  the  inception  of  the 
unauthorized  acts,  and  the  principal  is  bound  thereby. 

There  are  exceptions  to  this  rule.  If  an  innocent  third  person 
acquires  rights,  in  good  faith,  in  the  property,  after  the  commission 
of  the  unauthorized  act,  and  before  it  has  been  sanctioned  by  the 
principal,  the  ratification  will  not  operate  retrospectively  so  as  to 
defeat  such  intervening  rights.  ''Innocent  strangers,  with  interven- 
ing vested  rights,  are  not  so  precluded.  These  rights,  so  far  as  they 
accrued  prior  to  his  ratification,  the  principal  can  not  touch;  so  far 
as  they  are  concerned,  the  ratification  is  utterly  without  effect." 

In  this  case,  by  the  testimony,  Schloss  made  the  alleged  purchase 
about  the  27th  of  May,  1867.  Cohen  caused  his  attachment  to  be 
levied  upon  the  goods  about  the  24tli  of  June,  1867,  and  the  attempted 
ratification  did  not  take  place  earlier  than  July  5th,  1867.  So  far 
as  we  can  learn  from  the  testimony,  Cohen  was  creditor  of  Born- 
stien prior  to  the  alleged  purchase.  By  the  levy  of  his  attach- 
ment on  the  goods,  before  the  ratification  of  the  agent's  unauthorized 
purchase,  he  acquired  a  valid  claim  to  and  lien  upon  the  attached 
goods,  which  Pollock's  ratification  could  in  no  way  divest. 


AGENCY  425 

II.     Right  of  Third  Party  to  Withdraw  before  Ratification. 

Kline  Bros.  &  Co.  v.  Royal  Insurance  Co.,  Ltd.  1^2  Fed.  ^yS. 

When  the  corporation  of  KHne  Brothers  and  Company  was 
ahout  to  be  formed,  Mclntosli,  on  behalf  of  the  projected  corpora- 
tion, insured  with  the  defendant  company  property  which  it  was 
expected  the  new  corporation  would  acquire.  The  directors  of 
the  new  corporation  did  not  learn  of  the  existence  of  the  policy 
until  after  the  property  had  been  destroyed  by  fire,  whereupon 
they  purported  to  ratify  the  contract.  The  Insurance  Company 
defends  on  the  ground  that  until  ratification  there  was  no  contract. 

Held,  that  there  is  no  contract  before  ratification,  and  that  until 
that  time,  the  third  party  may  withdraw. 

Hand,  Dis.  J. 

There  seems  to  be  no  escape  from  the  conclusion  that  by  his 
contract  with  the  defendants  Mcintosh  did  not  bind  the  corporation 
to  pay  the  premiimi.  Furthermore,  the  board  of  directors  never 
learned  of  the  policies  until  after  the  tire,  and  did  not  therefore 
ratify  them  up  to  that  time.  At  least,  there  is  no  evidence  upon  that 
question  and  the  burden  rests  with  the  plaintifif.  As  I  view  it, 
no  subsequent  ratification  was  possible.  After  the  fire,  Mcintosh 
tendered  the  premium,  and  after  that  the  defendants  repudiated  any 
liability. 

The  facts,  therefore,  raise  two  questions :  First,  whether  a  third 
party  who  has  made  a  contract  with  an  unauthorized  agent  on  behalf 
of  his  principal  is  bound  before  the  principal  has  ratified;  and  second, 
if  not,  whether  the  occurrence  of  a  fire  before  the  unauthorized 
application  for  the  policy  has  been  ratified  prevents  its  future  ratifi- 
cation so  as  to  bind  the  company.  Upon  the  first  question,  there  is 
no  doubt  some  division  of  authority.  In  England  the  law  now  is  that 
the  third  party  may  not  withdraw,  provided  the  principal  ratifies  the 
contract  in  season.  On  the  other  hand,  in  Wisconsin  and  apparently 
in  Illinois,  the  whole  unauthorized  contract  seems  to  amount  only  to 
an  offer  by  the  third  person,  which  must  be  accepted  de  noz'o  by  the 
principal,  a  rule  certainly  at  variance  with  the  well-established  law 
that  an  uncommunicated  ratification  by  the  principal  will  bind  him. 
The  English  case  proceeds  on  the  civil  law  maxim,  "Omnis  ratihabitio 
retrotrahitnr,"  though  it  by  no  means  follows,  because  a  ratification 
relates  back  when  once  a  valid  contract  is  made,  that  the  third  party 
is  bound  meanwhile,  and  may  not  withdraw  while  the  principal 
remains  unbound.  Now,  relation  back  is,  in  the  sense  here  used,  a 
fiction,  and  certainly  should  not  be  extended  to  cover  unjust  cases, 
of  which  this  is  one,  as  I  shall  show.  In  so  far  as  by  the  maxim 
it  is  only  meant  to  say  that  a  ratification  carries  with  it  by  implication 
the  intention  of  the  principal  that  the  contract  shall  in  fact  date  from 
the  time  when  it  was  made  between  the  agent  and  the  third  party, 


426  COMMERCIAL    LAW    CASES 

it  is  unobjectionable  in  principle,  and  accords  with  the  facts;  but,  if 
taken  in  the  sense  that  the  law  will  regard  both  parties  as  bound 
from  the  date  of  the  contract,  it  merely  misstates  the  facts,  because. 
by  hypothesis,  the  principal  is  not  bound  before  ratification.  All  that 
the  law  can  do  is  to  hold  the  third  party  bound  from  the  outset,  and 
that  by  the  mere  force  of  authority.  It  certainly  serves  no  useful 
purpose  to  cloak  that  authority  in  a  phrase  which  misstates  the  truth 
in  Latin,  unless  it  accords  with  the  principles  of  the  law  of 
contracts,  or  at  least  produces  just  results  at  the  expense  of  those 
principles. 

Upon  principle  the  doctrine  does  not  appear  to  be  correct,  and 
it  has  been  criticised  by  text-writers.  The  contract  of  insurance  is 
bilateral,  and,  until  the  principal  ratifies,  he  is  by  hypothesis  under 
no  obligation  to  pay  the  premium.  If  so,  there  is  until  then  no  con- 
sideration to  support  the  counter  promise  of  the  third  person,  for  a 
consideration  implies  a  legal  obligation,  and  his  promise  ought  not 
in  principle  to  bind  him,  being  indeed  nudum  pactum.  Second:  The 
result  is  unfair  to  the  third  party,  since  it  permits  the  principal  to 
speculate  on  the  value  of  the  contract,  while  he  himself  remains 
unbound.  If  it  proves  advantageous,  he  may  ratify.  If  not,  he  may 
repudiate.  There  is  no  just  ground  for  giving  him  such  an  advantage 
over  the  third  party  merely  because  of  an  unknown  defect  in  the 
agent's  powers. 

In  the  case  at  bar  Mcintosh  certainly  did  not  intend  to  bind 
himself,  and  he  had  no  authority  to  bind  the  company.  Therefore, 
the  insurer  got  no  valid  promise  at  all.  Nor  should  this  case  be 
confused  with  those  in  which  a  ratification  is  used  against  the 
principal  when  he  is  sued. 

Here  the  insurer  likewise  knew  that  the  loss  had  occurred,  and 
nevertheless  did  not  withdraw  from  the  contract.  If,  however,  it 
be  once  admitted  that  it  was  not  binding  upon  them  until  ratified, 
it  could  not  be  ratified  or  accepted  by  paying  a  premium  after  the 
risk  had  ceased  and  the  fundamental  condition  of  the  promise  no 
longer  existed.  This  would  be  quite  obvious  had  the  offer  never 
been  accepted  at  all,  before  the  loss,  but,  if  the  policy  was  not  binding 
while  unratified,  the  situation  was  the  same  as  though  the  offer  had 
never  been  accepted. 

12.     Ratification  of  Criminal  Act. 

Henry  v.  Heeh.   114  Ind.   2y^. 

Heeb  sues  Henry  as  stirety  upon  a  note  made  by  a  partner- 
ship. Henry  denies  that  the  signature  on  the  note  is  his.  The 
evidence  is  to  the  effect  that  he  has  in  any  event  ratified  the  sig- 
nature. 

Held,  that  under  the  general  rule,  a  forged  signature  to  a  note 
may  not  be  ratified. 


AGENCY  427 

Mitchell,  C.  J. 

The  appellant  contends  that  a  person  whose  name  has  been 
forged  to  a  note  cannot  ratify  or  adopt  the  criminal  act,  so  as  to 
become  bound,  unless  facts  have  intervened  which  create  an  estoppel 
and  preclude  him  from  setting  up  as  a  defense  that  his  signature 
is  not  genuine.  There  appears  to  be  an  irreconcilable  conHict  in 
the  decisions  of  the  courts  of  last  resort  on  this  question.  Thus, 
the  Supreme  Judicial  Court  of  Massachusetts,  following  its  earlier 
decisions,  held  that  one  whose  signature  had  been  forged  to  a  promis- 
sory note,  who  yet,  with  knowledge  of  all  the  circumstances,  and 
intending  to  be  bound  by  it,  acknowledged  the  signature,  and  thus 
assumed  the  note  as  his  own,  was  bound  to  the  same  extent  as  if 
the  note  had  been  signed  by  him  originally. 

There  are  other  cases  which,  while  seeming  to  lend  support  to 
the  doctrine  that  a  forged  signature  may  be  ratified,  nevertheless 
turn  upon  the  proposition  that  the  holder  of  the  note  had  in  some 
way  acted  in  reliance  upon  the  promise  or  admission  of  the  person 
whose  name  appeared  on  the  note,  or  that  the  latter  had  received 
or  participated  in  the  consideration  for  which  the  note  had  been  given, 
and  was  therefore  estopped  to  deny  the  genuineness  of  his  signature. 
Still  other  decisions  depend  upon  principles  which  distinguish  them 
from  cases  involving  the  doctrine  of  ratification  or  adoption  of  forged 
instruments  purely. 

It  is  a  well  established  rule  of  law  that  if  one,  not  assuming  to 
act  for  himself,  does  an  act  for  or  in  the  name  of  another  upon  an 
assumption  of  authority  to  act  as  the  agent  of  the  latter,  even  though 
without  any  precedent  authority  whatever,  if  the  person  in  whose 
name  the  act  was  performed  subsequently  ratifies  or  adopts  what  has 
been  so  done,  the  ratification  relates  back  and  supplies  original 
authority  to  do  the  act.  In  such  a  case  the  principal  is  bound  to 
the  same  extent  as  if  the  act  had  been  done  in  the  first  instance  by 
his  previous  authority,  and  this  is  so  whether  the  act  be  detrimental 
to  the  principal  or  to  his  advantage,  or  whether  it  be  founded  in 
tort  or  contract.  The  reason  is,  that  there  was  an  open  assumption 
to  act  as  the  agent  of  the  party  who  subsequently  adopted  the  act. 
The  agency  having  been  knowingly  ratified,  the  ratification  becomes 
equivalent  to  original  authority.  So,  if  a  contract  be  voidable  on 
account  of  fraud  practiced  on  one  party,  or  if  for  any  reason  it  might 
be  avoided,  yet  if  the  party  having  the  right  to  avoid  the  contract, 
being  fully  informed,  deliberately  confirms  or  ratifies  it,  even  though 
this  be  done  without  a  new  consideration  and  after  acts  have  been 
done  which  would  have  released  the  person  afifected,  the  party  thus 
ratifying  is  thereby  precluded  from  obtaining  the  relief  he  otherwise 
might  have  had. 

The  ratification  or  adoption  of  a  forged  instrument,  or  of  a 
contract  which  is  prohibited  by  law  or  made  in  violation  of  a  criminal 
statute,  involves  altogether  different  principles.  One  who  commits 
the  crime  of  forgery  by  signing  the  name  of  another  to  a  promissory 


425  COMMERCIAL    LAW    CASES 

note  does  not  assume  to  act  as  the  agent  of  the  person  whose  name 
is  forged.  Upon  principle,  there  would  seem  to  be  no  room  to  apply 
the  doctrine  of  ratification  or  adoption  of  the  act  in  such  a  case. 
Where  the  act  done  constitutes  a  crime,  and  is  committed  without 
any  pretence  of  authority,  it  is  difficult  to  understand  how  one  who 
is  in  a  sense  the  victim  of  the  criminal  act  may  adopt  or  ratify  it, 
so  as  to  become  bound  by  a  contract  to  which  he  is  to  all  intents  and 
purposes  a  stranger,  and  which  as  to  him  was  conceived  in  a  crime 
and  is  totally  without  consideration.  As  has  been  well  said,  it  is 
impossible  in  such  a  case  to  attribute  any  motive  to  the  ratifying 
party  but  that  of  concealing  the  crime  and  suppressing  the  prosecution; 
"for  why  should  a  man  pay  money  without  consideration  when  he 
himself  had  been  wronged,  unless  constrained  by  a  desire  to  shield 
the  guilty  party?" 

The  distinction  made  in  many  well  considered  cases  seems  to  be 
this:  where  the  act  of  signing  constitutes  the  crime  of  forgery,  while 
the  person  whose  name  has  been  forged  may  be  estopped  by  his 
admissions,  upon  which  others  may  have  changed  their  relations,  from 
pleading  the  truth  of  the  matter  to  their  detriment,  the  act  from  which 
the  crime  springs  cannot,  upon  considerations  of  public  policy,  be 
ratified  without  a  new  consideration  to  support  it. 

In  case  of  a  known  or  conceded  forgery,  we  are  unable  to  discover 
any  principle  upon  which  a  subsequent  promise  by  the  person  whose 
name  was  forged  can  be  held  binding  in  the  absence  of  an  estoppel 
or  without  a  new  consideration  for  the  promise, 

C.     Agency  by  Estoppel. 

I.     The  Idea  of  Estoppel. 

Bronson's  Executor  r.  ChappcU.  12  Wall.  (U.  S.)  681. 

Bostwick,  as  agent  of  Bronson,  sold  property  in  Wisconsin  to 
E.  and  J.  Chappell.  The  contract  stated  that  Bostwick  was 
authorized  to  receive  the  first  payment  upon  the  contract.  Bost- 
wick usually  made  collections  for  Bronson,  and  acted  as  his  general 
agent  in  managing  his  real  estate  in  the  vicinity.  The  second 
payment  on  the  property  sold  to  the  Chap})ells  was  paid  by  them 
to  Bostwick,  who  thereafter  failed.  Bronson  sues  the  Chappells, 
claiming  that  they  should  not  have  made  payment  to  Bostwick. 

Held,  that  the  conduct  of  the  principal  may  estop  him  from 
setting  up  a  defense  as  to  the  nature  of  the  agent's  authority. 

Swaync,  J . 

Agents  arc  special,  general,  or  universal.  Where  written  evidence 
of  their  apijointment  is  tiot  required,  it  may  be  implied  from  circum- 
stances.    These   circumstances   are   the   acts  of   the   agent   and  their 


AGENCY  429 

recognition,  or  acquiescence,  by  the  principal.  The  same  considera- 
tions fix  the  category  of  the  agency  and  the  limits  of  the  authority 
conferred.  Where  one,  without  objection,  suffers  another  to  do  acts 
which  proceed  upon  the  ground  of  authority  from  him,  or  by  his 
conduct  adopts  and  sanctions  such  acts  after  they  are  done,  he  will 
be  bound,  although  no  previous  authority  exist,  in  all  respects  as  if 
the  requisite  power  had  been  given  in  the  most  formal  manner.  If 
he  has  justified  the  belief  of  a  third  party  that  the  person  assuming 
to  be  his  agent  was  authorized  to  do  wliat  was  done,  it  is  no  answer 
for  him  to  say  that  no  authority  had  been  given,  or  that  it  did  not 
reach  so  far,  and  that  the  third  party  had  acted  upon  a  mistaken 
conclusion.  He  is  estopped  to  take  refuge  in  such  a  defense.  If  a 
loss  is  to  be  borne,  the  author  of  the  error  must  bear  it.  If  business 
has  been  transacted  in  certain  cases  it  is  implied  that  the  like  business 
may  be  transacted  in  others.  The  inference  to  be  drawn  is,  that 
everything  fairly  within  the  scope  of  the  powers  exercised  in  the 
past  may  be  done  in  the  future,  until  notice  of  revocation  or  dis- 
claimer is  brought  home  to  those  whose  interests  are  concerned. 
Under  such  circumstances  the  presence  or  absence  of  authority  in 
point  of  fact,  is  immaterial  to  the  rights  of  third  persons  whose 
interests  are  involved.  The  seeming  and  reality  are  followed  by  the 
same  consequences.     In  either  case  the  legal  result  is  the  same. 

Viewed  in  the  light  of  the  law,  we  think  the  evidence  abundantly 
establishes  two  propositions : 

1.  That  Bostwick  was  the  agent  of  Bronson,  and  as  such 
authorized  to  receive  the  payments  in  question. 

2.  If  this  were  not  so,  that  the  conduct  of  Bronson — numerous 
transactions  between  him  and  Bostwick  and  the  course  of  business  by 
the  latter — authorized  or  known  to  and  acquiesced  in  by  the  former, 
justified  the  belief  by  the  defendants  that  Bostwick  had  such  authority 
and  that  Bronson  was  bound  accordingly. 


2.     To  What  Acts  of  the  Agent  Estoppel  Extends. 

Bank  of  Batavia  v.  The  New  York,  Lake  Erie  and  Western 
Railroad  Co.    106  N.  Y.  ip^. 

Weiss,  the  local  freight  agent  of  the  defendant  at  Batavia,  made 
two  hills  of  lading  to  a  consignee  in  New  York  in  pursuance  of  a 
fraudulent  scheme  evolved  by  himself  and  Williams,  whereby 
Williams  borrowed  money  from  the  bank  on  bills  of  lading  given 
by  Weiss  to  him,  when  no  goods  had  in  fact  been  received  for 
transmission.  The  bank  sues  the  railroad  upon  the  theory  that 
it  is  responsible  for  the  acts  of  its  agent. 

Held,  that  a  principal  is  estopped  to  deny  the  power  of  its 
agent  to  perform  acts  which  are  apparently  within  the  scope  of 
his  authority. 


430  COMMERCIAL    LAW    CASES 

Finch,  J. 

It  is  a  settled  doctrine  of  the  law  of  agency  in  this  state  that 
where  the  principal  has  clothed  his  agent  with  power  to  do  an  act 
upon  the  existence  of  some  extrinsic  fact  necessarily  and  peculiarly 
within  the  knowledge  of  the  agent,  and  of  the  existence  of  which  the 
act  of  executing  the  power  is  itself  a  representation,  a  third  person 
dealing  with  such  agent  in  entire  good  faith,  pursuant  to  the  apparent 
power,  may  rely  upon  the  representation  and  the  principal  is  estopped 
from  denying  its  truth  to  his  prejudice.  A  discussion  of  that  doctrine 
is  no  longer  needed  or  permissible  in  this  court,  since  it  has  survived 
an  inquiry  of  the  most  exhaustive  character,  and  an  assault  remarkable 
for  its  persistence  and  vigor.  If  there  be  any  exception  to  the  rule 
within  our  jurisdiction  it  arises  in  the  case  of  municipal  corporations 
whose  structure  and  functions  are  sometimes  claimed  to  justify  a  more 
restricted  liability.  The  application  of  this  rule  to  the  case  at  bar 
has  determined  it  in  favor  of  the  plaintiffs  and  we  approve  of  that 
conclusion. 

It  is  obvious  upon  the  case  as  presented  that  the  fact  or  condition 
essential  to  the  authority  of  the  agent  to  issue  the  bills  of  lading 
was  one  unknown  to  the  bank  and  peculiarly  within  the  knowledge 
of  the  agent  and  his  principal.  If  the  rule  compelled  the  transferee 
to  incur  the  peril  of  the  existence  or  absence  of  the  essential  fact, 
it  would  practically  end  the  large  volume  of  business  founded  upon 
transfers  of  bills  of  lading.  Of  whom  shall  the  lender  inquire,  and 
how  ascertain  the  fact  ?  Naturally  he  would  go  to  the  freight  agent, 
who  had  already  falsely  declared  in  writing  that  the  property  had 
been  received.  Is  he  any  more  authorized  to  make  the  verbal  repre- 
sentation than  the  written  one?  Must  the  lender  get  permission  to 
go  through  the  freight  house  or  examine  the  books?  If  the  property 
is  grain,  it  ma}'  not  be  easy  to  identify,  and  the  books,  if  disclosed, 
are  the  work  of  the  same  freight  agent.  It  seems  very  clear  that 
the  vital  fact  of  the  shipment  is  one  peculiarly  within  the  knowledge 
of  the  carrier  and  his  agent,  and  quite  certain  to  be  unknown  to 
the  transferee  of  the  bill  of  lading,  except  as  he  relies  upon  the 
representation  of  the  freight  agent. 

3.     Estoppel  to  Assert  Secret  Limitations. 

Bentley  v.  Doggett.  5/  Wis.  224. 

Otis  obtained  credit  for  carriage  hire  with  Bentley  in  the  name 
of  the  defendants,  who  eniployed  him  as  a  traveling  salesman  and 
who  had  advanced  to  him  enough  money  to  pay  the  cost  of  car- 
riage iiire.  Otis  liad  no  express  authority  from  the  defendants  to 
incur  any  liability  on  the  credit  of  the  firm.  Bentley  seeks  to 
recover  the  amount  of  the  hill,  contending  that  the  defendants 
are  estoijjjed  to  deny  the  authority  of  the  salesman. 


AGENCY  431 

Held,  that  a  principal  is  estopped  to  assert  limitations  upon 
the  ostensible  authority  of  his  agent. 

Taylor,  J. 

There  can  be  no  question  that,  from  the  nature  of  the  business 
required  to  be  done  by  their  agent,  the  defendants  held  out  to  those 
who  might  have  occasion  to  deal  with  him,  that  he  had  the  right  to 
contract  for  the  use  of  teams  and  carriages  necessary  and  convenient 
for  doing  such  business,  in  the  name  of  his  principals,  if  he  saw  lit, 
in  the  way  such  service  is  usually  contracted  for;  and  we  may,  perhaps, 
take  judicial  notice  that  such  service  is  usually  contracted  for,  payment 
to  be  made  after  the  service  is  performed.  It  would  seem  to  follow 
that,  as  the  agent  had  the  power  to  bind  his  principals  by  a  contract 
for  such  service,  to  be  paid  for  in  the  usual  way,  if  he  neglects  or 
refuses  to  pay  for  the  same  after  the  service  is  performed,  the  prin- 
cipals must  pay.  The  fault  of  the  agent  in  not  paying  out  of  the 
money  of  his  principals  in  his  hands  cannot  deprive  the  party  furnish- 
ing the  service  of  the  right  to  enforce  the  contract  against  them,  he 
being  ignorant  of  the  restricted  authority  of  the  agent.  If  the  party 
furnishing  the  service  knew  that  the  agent  had  been  furnished  by  his 
principal  with  the  money  to  pay  for  the  service,  and  had  been  for- 
bidden to  pledge  the  credit  of  his  principals  for  such  service,  he 
would  be  in  a  different  position.  Under  such  circumstances,  if  he 
furnished  the  service  to  the  agent,  he  would  be  held  to  have  furnished 
it  upon  the  sole  credit  of  the  agent,  and  he  would  be  compelled  to 
look  to  the  agent  alone  for  his  pay.  We  think  the  rule  above  stated 
as  governing  the  case  is  fully  sustained  by  the  fundamental  principles 
of  law  which  govern  and  limit  the  powers  of  agents  to  bind  their 
principals  when  dealing  with  third  persons.  Judge  Story,  in  his  work 
on  Agency,  says :  "The  principal  is  bound  by  all  acts  of  his  agent 
within  the  scope  of  the  authority  which  he  holds  him  out  to  the  world 
to  possess,  although  he  may  have  given  more  limited  private  instruc- 
tions unknown  to  the  persons  dealing  with  him."  Later  he  says : 
"So  far  as  an  agent,  whether  he  is  a  general  or  special  agent,  is 
in  any  case  held  out  to  the  public  at  large,  or  to  third  persons  dealing 
with  him,  as  competent  to  contract  for  and  bind  the  principal,  the 
latter  will  be  bound  by  the  acts  of  the  agent,  notwithstanding  he  may 
have  deviated  from  his  secret  instructions."  And  again,  in  speaking 
of  the  power  of  an  agent  acting  under  a  written  authority,  he  says : 
"In  each  case  the  agent  is  apparently  clothed  with  full  authority 
to  use  all  such  usual  and  appropriate  means,  unless  upon  the  face  of 
the  instrument  a  more  restrictive  authority  is  given,  or  must  be 
inferred  to  exist.  In  each  case,  therefore,  as  to  third  persons 
innocently  dealing  with  his  agent,  the  principal  ought  equally  to  be 
bound  by  acts  of  the  agent  executing  such  authority  by  any  of 
those  means,  although  he  may  have  given  to  the  agent  separate  private 
and  secret  instructions  of  a  more  limited  nature,  or  the  agent  may 
be  secretly  acting  in  violation  of  his  duty." 


432  COMMERCIAL    LAW    CASES 

In  this  view  of  the  case  it  was  immaterial  what  the  orders  of 
the  principal  were  to  the  agent,  or  that  he  furnished  him  money 
to  pay  these  charges,  so  long  as  the  person  furnishing  the  service 
was  in  ignorance  of  such  facts.  In  order  to  relieve  himself  from 
liability,  the  principal  was  bound  to  show  that  the  plaintiff  had 
knowledge  of  the  restrictions  placed  upon  his  agent,  or  that  the 
custom  to  limit  the  powers  of  agents  of  this  kind  was  so  universal 
that  the  plaintiff  must  be  presumed  to  have  knowledge  of  such  custom. 

4.    Necessity  of  Misleading  Third  Person  in  Order  to  Create 
Estoppel. 

Crane  v.  Gruenewald.    120  N.  Y.  2/4. 

Mrs.  Crane,  acting  through  her  attorney,  Baker,  lent  the  de- 
fendant $8,000  upon  a  bond  secured  by  mortgage.  The  defendant 
paid  $3,000  on  account  of  the  debt  to  Baker  while  he  had  the  bond 
and  mortgage  in  his  possession,  and  afterwards  paid  the  remainder 
to  him,  when  he  had  transferred  them  by  a  forged  assignment  to  a 
third  party.    Mrs.  Crane  sues  to  foreclose  the  mortgage. 

Held,  that  while  the  attorney  had  possession  of  the  bond  and 
mortgage,  he  had  ostensible  authority  to  receive  payments  upon 
them,  but  thereafter  his  ostensible  authority  ceased. 

Parker,  J. 

A  mortgagor  who  makes  a  paymer"  to  one,  other  than  the 
mortgagee,  does  so  at  his  peril.  If  the  payment  be  denied,  upon  him 
rests  the  burden  of  proving  that  it  was  paid  to  one  clothed  with 
authority  to  receive  it.  There  is,  however,  one  exception  to  this 
general  rule.  If  payment  be  made  to  one  having  apparent  authority 
to  receive  the  money,  it  will  be  treated  as  if  actual  authority  had 
been  given  for  its  receipt. 

So,  if  a  mortgagee  permits  an  attorney,  who  negotiates  a  loan, 
to  retain  in  his  possession  the  bond  and  mortgage,  after  the  principal 
is  due,  and  the  mortgagor,  with  knowledge  of  that  fact,  and  relying 
upon  the  apparent  authority  thus  afforded,  shall  make  a  payment  to 
him,  the  owner  will  not  be  permitted  to  deny  that  the  attorney 
possessed  the  authority  which  the  presence  of  the  securities  indicated 
that  he  had.  This  rule  comprises  two  elements :  First,  possession  of  the 
securities  by  the  attorney  with  the  consent  of  the  mortgagee;  and  the 
second,  knowledge  of  such  possession  on  the  part  of  the  mortgagor. 
The  mortgagor  must  have  knowledge  of  the  fact.  It  would  not  avail 
him  to  prove  that  subsequent  to  a  payment  he  discovered  that  the 
securities  were  in  the  actual  custody  of  the  attorney  when  it  was  made. 
For  he  could  not  have  been  misled  or  deceived  by  a  fact,  the  existence 
of  which  was  unknown  to  liim.  It  is  the  information  which  he 
acquires  of  the  possession  which  apprises  him  that  the  attorney  has 
apparent  authority  to  act  for  the  principal.     It  is  the  appearance  of 


AGENCY  433 

authority  to  collect,  furnished  by  the  custody  of  the  securities,  which 
justifies  him  in  making  payment.  And  it  is  because  the  mortgagor 
acts  in  reliance  upon  such  appearance,  an  appearance  made  possible 
only  by  the  act  of  the  mortgagee  in  leaving  the  securities  in  the  hands 
of  an  attorney  that  estops  the  owner  from  denying  the  existence  of 
authority  in  the  attorney  which  sucli  possession  indicates. 

Information  of  the  physical  fact  of  possession  by  the  attorney 
is  alone  effectual  for  protection.  And  he  must  have  such  knowledge 
when  every  payment  is  made,  for  no  presumption  of  a  continuance 
of  possession  can  be  indulged  in  for  the  purpose  of  giving  support 
to  an  apparent  authority  on  the  part  of  an  attorney  to  act,  where 
no  actual  authority  exists.  This  knowledge  he  did  not  have,  for 
it  was  not  the  fact.  By  his  own  wrongful  act,  the  attorney  had 
parted  with  possession,  and  as  a  necessary  consequence  has  deprived 
himself  of  the  power  to  longer  misrepresent  his  authority  in  respect 
thereto  to  the  detriment  of  the  mortgagee.  The  mortgagor  thereafter 
placed  his  trust  solely  in  the  assertions  of  the  attorney  and  was 
deceived.  In  so  doing  he  was  legally  as  much  at  fault  as  the  mort- 
gagee, who  also  relied  upon  the  attorney's  trustworthiness.  There- 
fore, he  cannot  invoke  in  support  of  his  contention  the  doctrine 
of  apparent  authority,  a  rule  which  undoubtedly  had  its  foundation 
in  the  equitable  principle  that  if  one  of  two  innocent  persons  must 
suffer,  he  ought  to  suffer  in  preference  whose  conduct  has  misled 
the  confidence  of  the  other  into  an  unwary  act. 

5.     Right  of  Third  Party  to  Rely  on  Apparent  Authority. 

Heath  v.  Stoddard,  pi  Mc.  4gp. 

Heath  gave  Spencer  possession  of  a  piano  and  instructed  him 
to  leave  it  with  Stoddard  in  anticipation  of  a  sale  to  Stoddard. 
Spencer  had  in  fact  no  authority  to  make  any  contract  for  the 
sale  of  the  piano,  but  he  assumed  authority  to  sell  it  to  Stoddard 
and  appropriated  the  proceeds.  Heath  sues  to  recover  possession 
of  the  piano. 

Held,  that  a  person  who  has  clothed  an  agent  with  apparent 
authority  is  estopped  to  deny  that  authority. 

Wiswell,  J. 

A  principal  is  not  only  bound  by  the  acts  of  his  agent,  whether 
general  or  special,  within  the  authority  which  he  has  actually  given 
him,  but  he  is  also  bound  by  his  agent's  acts  within  the  apparent 
authority  which  the  principal  himself  knowingly  permits  his  agent 
to  assume,  or  which  he  holds  the  agent  out  to  the  public  as  possessing. 

Whether  or  not  a  principal  is  bound  by  the  acts  of  his  agent, 
when  dealing  with  a  third  person  who  does  not  know  the  extent  of 
his  authority,  depends,  not  so  much  upon  the  actual  authority  given 
or  intended  to  be  given  by  the  principal,  as  upon  the  question,  What 


434  COMMERCIAL    LAW    CASES 

did  such  third  person,  deahng  with  the  agent,  believe  and  have  a 
right  to  believe  as  to  the  agent's  authority,  from  the  acts  of  the 
principal. 

For  instance,  if  a  person  should  send  a  commodity  to  a  store 
or  warehouse  where  it  is  the  ordinary  business  to  sell  articles  of  the 
same  nature,  would  not  a  jury  be  justified  in  coming  to  the  conclusion 
that,  at  least,  the  owner  had  by  his  own  act  invested  the  person  with 
whom  the  article  was  entrusted,  with  an  apparent  authority  which 
would  protect  an  innocent  purchaser? 

Let  us  apply  this  principle  to  the  present  case.  Spencer  was 
a  dealer  in  pianos.  Immediately  before  this  transaction  he  had  been 
trying  to  sell  a  piano  to  the  defendant.  There  was  evidence  tending 
to  show  that  the  plaintiff  knew  these  facts.  With  this  knowledge 
he  entrusted  the  possession  of  this  piano  with  Spencer  for  the  purpose 
of  its  being  taken  by  Spencer  to  the  defendant's  house  with  a  view 
to  its  sale.  Spencer  was  not  acting  merely  as  a  bailee ;  he  did  not 
personally  take  the  piano  to  the  defendant's  house,  but  had  it  done 
by  a  truckman  or  expressman ;  Spencer  was  employed  for  some  other 
purpose.  Whatever  may  have  been  the  private  arrangement  between 
the  plaintiff  and  Spencer,  or  the  limit  of  authority  given  by  the 
plaintiff,  would  not  a  jury  have  been  warranted  in  com.ing  to  the 
conclusion  that  the  purchaser  was  justified  in  believing,  in  view  of 
all  these  facts,  that  Spencer  had  authority  to  sell,  and  that  the 
plaintiff  knowingly  placed  Spencer  in  a  position  where  he  could 
assume  this  apparent  authority  to  the  injury  of  the  defendant?  We 
think  that  a  jury  might  have  properly  come  to  such  a  conclusion. 

6.     Principles  of  Estoppel  Equally  Applicable  to  General  and 
Special  Agents. 

Hatch  V.  Taylor.  lo  N.  H.  538. 

Hatch  gave  Clark  authority  to  sell  or  exchange  two  horses 
for  him,  and  instructed  him  not  to  sell  one  without  the  other. 
Clark  exchanged  one  of  the  horses  for  a  mare  and  colt  belonging  to 
the  defendant.  Hatch  refused  to  recognize  the  transaction,  and 
now  seeks  to  recover  the  value  of  the  horse. 

Held,  that  the  ostensible  authority  of  a  special  agent  is  in 
most  respects  the  same  as  that  of  a  general  agent. 

Parker,  C.  J. 

Where  private  instructions  are  given  to  a  special  agent,  respecting 
the  mode  and  manner  of  executing  his  agency,  intended  to  be  kept 
secret,  and  not  communicated  to  those  with  whom  he  may  deal,  such 
instructions  arc  not  to  be  regarded  as  limitations  upon  his  authority; 
and  notwithstanding  he  disregards  them,  his  act,  if  otherwise  within 
the  scope  of  his  agency,  will  be  valid  and  bind  his  employer. 

In  the  case  of  general  agents,  the  principal   will  be  bound  by 


AGENCY  435 

the  acts  of  his  agent,  within  the  scope  of  the  general  authority  con- 
ferred upon  him,  although  he  violates  by  these  acts  his  private 
instructions  and  directions.  He  is  acting  within  the  scope  of  his 
authority,  or  apparent  authority.  So  a  special  agent,  who  has  private 
instructions  for  his  government,  but  which  are  not  to  be  communicated 
to  those  dealing  with  him,  is  acting  within  the  scope  of  his  authority, 
or  apparent  authority,  when  he  is  acting  within  the  scope  of  what  he 
is  to  communicate,  and  what  only  the  party  dealing  with  him  is 
authorized  to  know,  or  is  to  know  if  he  inquires. 

In  fact,  there  seems  to  be,  in  such  case,  a  holding  out  of  the 
agent,  or  an  authorization  to  him  to  hold  himself  out,  as  having  an 
authority  beyond  the  private  instructions  intended  to  limit  his  action 
upon  the  subject  matter;  and  upon  that  principle  the  employer  should 
be  bound.  The  principle  which  pervades  all  cases  of  agency,  whether 
it  be  a  general  or  special  agency,  is  this :  The  principal  is  bound  by 
a!l  acts  of  his  agent  within  the  scope  of  the  authority  which  he  holds 
him  out  to  the  world  to  possess;  although  he  may  have  given  him 
more  limited  private  instructions  unknown  to  the  persons  dealing 
with  him. 

D.     Agency  by  Necessity. 

I.    What  Constitutes  Agency  by  Necessity. 

The  Terrc  Haute  &  Indianapolis  Railroad  Company  v. 
McMiirray.  p8  Ind.  j§8. 

The  plaintiff,  a  physician,  was  called  by  a  conductor  of  the 
defendant  railroad  to  attend  Coon,  a  brakeman  in  the  employ  of 
the  defendant,  whose  foot  had  been  crushed  and  who  required 
immediate  surgical  attention.  To  a  suit  for  payment  for  the 
services  rendered  by  the  doctor,  the  defense  is  that  the  conductor 
had  no  authority  to  incur  such  a  liability  on  behalf  of  the  rail- 
road. 

Held,  that  an  act  not  ordinarily  within  the  authority  of  the 
agent  may,  nevertheless,  in  case  of  necessity  be  binding  on  the 
principal. 

Elliott,  J. 

The  authority  of  an  agent  is  to  be  determined  from  the  facts  of 
the  particular  case.  Facts  may  exist  which  will  greatly  broaden  or 
greatly  lessen  an  agent's  authority.  A  conductor's  authority  in  the 
presence  of  a  superior  agent  may  dwindle  into  insignificance ;  while 
in  the  absence  of  a  superior  it  may  become  broad  and  comprehensive. 
An  emergency  may  arise  which  will  require  the  corporation  to  act 
instantly,  and  if  the  conductor  is  the  only  agent  present,  and  the 
emergency  is  urgent,  he  must  act  for  the  corporation,  and  if  he  acts 


43^  COMMERCIAL   LAW    CASES 

at  all,  his  acts  are  of  just  as  much  force  as  that  of  the  highest  officer 
of  the  corporation.  In  this  instance  the  conductor  was  the  highest 
officer  on  the  ground ;  he  was  the  sole  representative  of  the  corpora- 
tion; he  it  was  upon  whom  devolved  the  duty  of  representing  the 
corporation  in  matters  connected  within  the  general  line  of  his  duty 
in  the  sudden  emergency  which  arose  out  of  the  injury  to  the  fellow- 
servant  immediately  under  his  control;  either  he,  as  the  superior 
agent  of  the  company,  must,  in  such  cases,  be  its  representative,  or 
it  has  none.  There  are  cases  where  the  conductor  is  the  only  repre- 
sentative of  the  corporation  that  in  the  emergency  it  can  possibly 
have.  There  are  cases,  where  the  train  is  distant  from  the  super- 
vision of  superior  officers,  where  the  conductor  must  act  and  act 
for  the  company,  and  where,  for  the  time,  and  under  the  exigencies 
of  the  occasion,  he  is  its  sole  representative,  and  if  he  be  its  only 
representative,  he  must,  for  the  time  and  the  exigency,  be  its  highest 
representative.  Simple  examples  will  prove  this  to  be  true.  Suppose, 
for  illustration,  that  a  train  is  brought  to  a  halt  by  the  breaking 
of  a  bolt,  and  that  near  by  is  a  mechanic  who  can  repair  the  broken 
bolt,  and  enable  the  train  to  proceed  on  its  way ;  may  not  the  conductor 
employ  the  mechanic?  Again,  suppose  a  bridge  is  discovered  to 
be  unsafe,  and  that  there  are  timbers  at  a  neighboring  mill  which 
will  make  it  safe ;  may  not  the  conductor,  in  behalf  of  his  principal, 
employ  men  to  haul  the  timber  to  the  bridge?  Once  more,  suppose 
the  engineer  of  a  locomotive  to  be  disabled,  and  that  it  is  necessary 
to  at  once  move  the  train  to  avoid  danger,  and  there  is  near  by  a 
competent  engineer;  may  not  the  conductor  employ  him  to  take  the 
train  out  of  danger?  In  these  examples  we  mean  to  include,  as  a 
silent  factor,  the  fact  that  there  is  an  emergency,  allowing  no  time 
for  communicating  with  superior  officers,  and  requiring  immediate 
action.  If  it  be  true  that  there  are  cases  of  pressing  emergency 
where  the  conductor  is  on  the  special  occasion  the  highest  represen- 
tative of  the  company,  then  it  must  be  true  that  he  may  do,  in  the 
emergency,  what  the  chief  officer,  if  present,  might  do.  If  the  con- 
ductor is  the  only  agent  who  can  represent  the  company,  then  it  is 
inconceivable  that  he  should,  for  the  purposes  of  the  emergency  and 
during  its  existence,  be  other  than  the  highest  officer.  The  position 
arises  with  the  emergency,  and  ends  with  it.  The  authority  incident 
to  the  position  is  such,  and  such  only,  as  the  emergency  imperatively 
creates. 

Assuming,  as  we  may  justly  do,  that  there  are  occasions  when 
the  exigency  is  so  great,  and  the  necessity  so  pressing,  that  the  con- 
ductor stands  temporarily  as  the  representative  of  the  company,  with 
authority  adequate  to  the  urgent  and  immediate  demands  of  the 
occasion,  we  inquire  what  is  such  an  emergency  as  will  clothe  him 
with  this  authority  and  put  him  in  the  position  designated.  Suppose 
that  a  locomotive  is  overturned  ujjon  its  engineer,  and  he  is  in  imme- 
diate danger  of  great  bodily  harm;  would  it  not  be  competent  for 
the  conductor  to  hire  a  derrick  or  a  lifting  apparatus,  if  one  were 
near  at  Jiand,  to  lift  the  locomotive  from  tlie  body  of  the  engineer? 


AGENCY  437 

Surely  someone  owes  a  duty  to  a  man,  imperilled  as  an  engineer 
would  be  in  the  case  supposed,  to  release  him  from  peril,  and  is  there 
any  one  upon  whom  this  duty  can  be  so  justly  put  as  upon  his 
employer?  The  man  must,  in  the  case  supposed,  have  assistance,  and 
do  not  the  plainest  principles  of  justice  require  that  the  primary  duty 
of  yielding  assistance  should  devolve  upon  the  employer  rather  than 
on  strangers?  An  employer  docs  not  stand  to  his  servants  as  a 
stranger;  he  owes  them  a  duty.  The  cases  all  agree  that  some  duty 
is  owing  from  the  master  to  the  servant,  but  no  case  that  we  have 
been  able  to  find  defines  the  limits  of  this  duty.  Granting  the  exist- 
ence of  this  general  duty,  and  no  one  will  deny  that  such  a  duty 
does  exist,  the  inquiry  is  as  to  its  character  and  extent.  Suppose 
the  axle  of  a  car  to  break  because  of  a  defect,  and  a  brakeman's  leg 
to  be  mangled  by  the  derailment  consequent  upon  the  breaking  of 
the  axle,  and  that  he  is  in  imminent  danger  of  bleeding  to  death  unless 
surgical  aid  is  summoned  at  once,  and  suppose  the  accident  to  occur 
at  a  point  where  there  is  no  station  and  when  no  officer  superior  to 
the  conductor  is  present ;  would  not  the  conductor  have  authority  to 
call  a  surgeon?  Is  there  not  a  duty  to  the  mangled  man  that  some 
one  must  discharge?  And  if  there  be  such  a  duty,  who  owes  it, 
the  employer  or  a  stranger?  Humanity  and  justice  unite  in  affirming 
that  some  one  owes  him  this  duty,  since  to  assert  the  contrary  is  to 
affirm  that  upon  no  one  rests  the  duty  of  calling  aid  that  may  save  life. 
If  we  concede  the  existence  of  this  general  duty,  then  the  further 
search  is  for  the  one  who  in  justice  owes  the  duty,  and  surely,  where 
the  question  comes  between  the  employer  and  a  stranger,  the  just 
rule  must  be  that  it  rests  upon  the  former. 

2.     What  is  Necessity. 

Gimlliam  v.  Twist.  (i8pj)  2  Q.  B.  (Eng.)  84. 

Gwilliam  sues  Twist  and  others,  the  proprietors  of  an  omnibus, 
for  injuries  occasioned  by  negligent  driving.  Harrison,  the  driver 
of  the  omnibus,  was  ordered  to  stop  driving  by  the  police  when 
a  quarter  of  a  mile  from  the  defendants'  place  of  business  on  the 
ground  that  he  was  too  intoxicated  to  continue  as  driver.  He 
then  authorized  a  man  named  Veares,  a  former  driver,  to  drive  the 
omnibus  back  to  the  yard.  It  was  during  the  course  of  Veares' 
driving  that  the  plaintifif  \vas  injured.  The  defendants  deny  the 
authority  of  Harrison  to  employ  Veares. 

Held,  that  there  was  no  agency  by  necessity,  and  the  defendants 
are  not  liable  for  the  negligence  of  Veares. 

Smith,  L.  J. 

Ordinarily  a  master  is  not  responsible  for  injuries  arising  from 
an  act  of  a  servant  when  done  not  within  the  scope  of  his  employment. 
The  question  is  whether  under  the  circumstances  of  this  case  it  was 


43^  COMMERCIAL    LAW    CASES 

\vithin  the  scope  of  Harrison's  employment  to  put  up  Veares  to  drive 
the  omnibus  as  he  did.  If  it  was  not,  his  employers  are  not  liable. 
It  is  clear  that  it  is  not  prima  facie  within  the  scope  of  a  coachman's 
employment  to  delegate  the  duty  of  driving  to  other  persons.  But 
it  was  argued  that  circumstances  might  exist  which  would  constitute 
the  coachman  an  agent  of  necessity  on  behalf  of  his  master  to  employ 
some  one  else  to  drive,  and  that  under  such  circumstances  he  would 
have  authority  to  do  so.  To  constitute  a  person  an  agent  of  necessity 
he  must  be  unable  to  communicate  with  his  employer;  he  cannot  be 
such  an  agent  if  he  is  in  a  position  to  do  so.  The  impossibility  of 
communicating  with  the  principal  is  the  foundation  of  the  doctrine 
of  an  agent  of  necessity.  In  relation  to  the  sale  of  cargo  by  the 
master  of  a  ship  as  being  an  agent  of  necessity,  [it  was  said :]  "If  there 
is  a  fair  expectation  of  obtaining  directions,  either  from  the  owners 
of  the  goods  or  from  agents  known  by  the  master  to  have  authority 
to  deal  with  the  goods,  within  such  time  as  would  not  be  imprudent, 
the  master  must  make  every  reasonable  endeavor  to  get  those  direc- 
tions, and  his  authority  to  sell  does  not  arise  until  he  has  failed  to 
get  them."  The  county  court  judge  in  stating  his  findings  of  fact  did 
not  specifically  find  that  there  was  a  necessity  for  the  delegation  of 
the  duty  of  driving  the  omnibus  to  Veares.  It  is  true  that  in  subse- 
quently giving  judgment  he  says  that  it  was  necessary  that  some  one 
should  drive  the  omnibus  home,  but  he  does  not  seem  to  me  to  have 
applied  his  mind  to  the  question  as  to  what  constitutes  an  agent  of 
necessity.  The  mere  fact  that  somebody  must  drive  the  omnibus 
home,  which  is  obvious,  does  not  constitute  the  driver  an  agent  of 
necessity,  to  employ  Veares  to  do  so ;  and  I  think  that  on  the  facts 
proved  there  is  no  evidence  that  he  was  such  an  agent.  When  the 
driver  was  ordered  to  desist  from  driving  by  the  policeman,  the 
omnibus  was  only  a  quarter  of  a  mile  from  the  defendants'  yard,  and 
there  was  an  obvious  possibility  of  communicating  with  the  employers 
and  by  a  reasonable  endeavour  obtaining  their  directions  as  to  what 
was  to  be  done.  It  seems  to  me,  therefore,  that  there  was  no  evidence 
to  show  that  Harrison  was  an  agent  of  necessity  so  as  to  justify  the 
putting  up  Veares  to  drive  the  onmibus,  and  therefore,  it  not  being 
within  the  scope  of  his  employment  to  do  so,  the  defendants  are  not 
responsible  for  Veares'  negligence. 


3.     Agency  by  Necessity  of  Wife. 

Bergh  v.   Warner.  4^  Minn.   2^0. 

Mrs.  Berjjh  l)ouj:;^ht  a  pair  of  diamond  car-rinc^s  from  Warner, 
who  sues  lier  liiishand  for  the  price.  P>ergli  had  refused  to  author- 
ize tile  purchase,  and  denies  her  authority  to  pledge  his  credit. 

Held,  that  except  in  case  of  necessity,  a  husband  is  not  respon- 
sible for  debts  incurred  by  his  wife  without  actual  or  ostensible 
authority. 


AGENCY  439 

Mitchell  J. 

The  wife  has,  by  virtue  of  the  marriage  relation  alone,  no 
authority  to  bind  her  husband  by  contracts  of  a  general  nature. 
She  may,  however,  be  his  agent,  and,  as  such,  bind  him.  This  agency 
is  frequently  spoken  of  as  being  of  two  kinds :  First,  that  which  the 
law  creates  as  the  result  of  the  marriage  relation,  by  virtue  of  which 
the  wife  is  authorized  to  pledge  the  husband's  credit  for  the  purpose 
of  obtaining  those  necessaries  which  the  husband  himself  has  neglected 
or  refused  to  furnish ;  second,  that  which  arises  from  the  authority 
of  the  husband,  expressly  or  impliedly  conferred,  as  in  other  cases. 
The  first  of  these,  sometimes  called  an  "agency  in  law,"  or  an  "agency 
of  necessit}',"  is  not,  accurately  speaking,  referable  to  the  law  of 
agency ;  for  the  liability  of  the  husband  in  such  cases  is  not  at  all 
dependent  upon  any  authority  conferred  by  him.  He  would,  under 
such  circumstances,  be  liable  although  the  necessaries  were  furnished 
to  the  wife  against  his  express  orders.  The  real  foundation  of  the 
husband's  liability  in  such  cases  is  the  clear  legal  duty  of  every 
husband  to  support  his  wife,  and  supply  her  with  necessaries  suitable 
to  her  situation  and  his  own  circumstances  and  condition  in  life.  But 
the  wife's  authority  on  this  ground  to  contract  debts  on  the  credit  of 
her  husband  is  limited  in  its  extent  and  nature  to  the  legal  require- 
ments fixed  for  its  creation,  of  the  existence  of  which  those  persons 
who  assume  to  deal  with  the  wife  must  take  notice  at  their  peril. 
If  they  attempt  to  hold  the  husband  liable  on  this  ground,  the  burden 
of  proof  is  upon  them  to  show,  first,  that  the  husband  refused  or 
neglected  to  provide  a  suitable  support  for  his  wife ;  and,  second, 
that  the  articles  furnished  were  necessaries.  The  term  "necessaries," 
in  its  legal  sense,  as  applied  to  a  wife,  is  not  confined  to  articles  of 
food  and  clothing  required  to  sustain  life  or  preserve  decency,  but 
includes  such  articles  of  utility,  or  even  ornament,  as  are  suitable 
to  maintain  the  wife  according  to  the  estate  and  rank  of  her 
husband. 

In  regard  to  the  much  vexed  question  as  to  how  it  is  to  be 
determined,  in  a  given  case,  whether  the  articles  furnished  were 
necessaries,  the  general  rule  adopted  is  that  laid  down  by  Chief 
Justice  Shaw,  that  it  is  a  question  of  fact  for  the  jury,  unless  in  a 
very  clear  case,  where  the  court  would  be  justified  in  directing 
authoritatively  that  the  articles  cannot  be  necessaries. 

In  this  case  the  plaintiff  utterly  failed  to  establish  a  right  to 
recover  for  the  articles  sued  for  in  the  first  cause  of  action  as 
"necessaries."  Conceding,  for  the  sake  of  argument,  that,  in  view 
of  the  estate  and  rank  of  the  defendant,  the  trial  judge  would  have 
been  justified  in  finding  as  a  fact  that  diamond  ear-rings  were  neces- 
saries; yet,  so  far  from  there  being  any  evidence  that  the  defendant 
neglected  or  refused  to  provide  his  wife  a  suitable  support,  it  aftirma- 
tively  appeared  that  he  provided  for  her  amply,  and  even  liberally. 

The  only  ground  upon  which  the  defendant  could  be  held  liable 
was  by  proof  that  he  expressly  or  impliedly  authorized  his  wife  to 


440  COMMERCIAL    LAW    CASES 

purchase  the  articles  on  his  credit.  This  is  purely  and  simply  a 
question  of  agency,  which  rests  upon  the  same  considerations  which 
control  the  creation  and  existence  of  the  relation  of  principal  and 
agent  between  other  persons.  The  ordinary  rules  as  to  actual  and 
ostensible  agency  must  be  applied.  The  agency  of  the  wife,  if  it 
exists,  must  be  by  virtue  of  the  authorization  of  the  husband,  and 
this  may,  as  in  other  cases,  be  express  or  implied.  Her  authority, 
however,  when  implied,  is  to  be  implied  from  acts  and  conduct,  and 
not  from  her  position  as  wife  alone.  Of  course,  the  husband,  as 
M'ell  as  every  principal,  is  concluded  from  denying  that  the  agent 
had  such  authority  as  he  was  held  out  by  his  principal  to  have,  in 
such  a  manner  as  to  raise  a  belief  in  such  authority,  acted  on  in 
making  the  contract  sought  to  be  enforced.  Such  liability  is  not 
founded  on  any  rights  peculiar  to  the  conjugal  relation,  but  on  other 
grounds  of  universal  application.  By  having,  without  objection, 
permitted  his  wife  to  contract  other  bills  of  a  similar  nature  on  his 
credit,  or  by  payment  of  such  bills  previously  incurred,  and  thus 
impliedly  recognizing  her  authority  to  contract  them,  a  husband  may 
have  clothed  his  wife  with  an  ostensible  agency  and  apparent  authority 
to  contract  the  bill  sued  on,  so  as  to  render  him  liable,  although  she 
had  no  actual  authority,  just  as  any  principal  would  be  liable  under 
like  circumstances.  It  is  also  true  that  where  the  wife  is  living 
with  her  husband,  she,  as  the  head  and  manager  of  his  household, 
is  presumed  to  have  authority  from  him  to  order  on  his  credit  such 
goods  or  services  as,  in  the  ordinary  arrangement  of  her  husband's 
household,  are  required  for  family  use.  This  presumption  is  founded 
upon  the  well-known  fact  that,  in  modern  society,  almost  universally, 
the  wife,  as  the  manager  of  the  household,  is  clothed  with  authority 
thus  to  pledge  her  husband's  credit  for  articles  of  ordinary  household 
use.  But  the  articles  sued  for  here  are  not  of  that  character,  and 
no  such  presumption  would  arise  from  the  mere  fact  that  the  parties 
were  living  together  as  husband  and  wife.  To  hold  the  husband 
liable  there  must  have  been  some  affirmative  proof  of  authority 
from  him,  either  express,  or  implied  from  his  acts  and  conduct. 
In  this  case  there  is  an  entire  absence  of  any  evidence  of  express 
authority. 


II. 

OPERATION  OF  AGENCY. 

There  are  certain  reciprocal  rit;hls  and  duties  between  princi- 
pal and  agent.  The  princijjal  owes  the  agent  the  duty  of  dealing 
fairly  with  him,  of  compensating  him  for  his  services,  of  repaying 
advances  or  losses  incurred  by  the  agent  in  the  prosecution  of  the 
princijjal's  l)usincss,  and  in  the  case  of  agents  whose  eni])loyment 


AGENCY  441 

is  primarily  that  of  servant,  of  supplying  a  reasonably  safe  place 
in  which  to  work,  and  ordinarily  careful  fellow  servants. 

The  agent  owes  the  principal  the  duty  of  obeying  his  instruc- 
tions, of  exercising  the  skill  and  judgment  which  he  has  agreed 
to  use  or  which  he  has  held  himself  out  as  having,  of  acting  in  good 
faith,  which  implies  that  he  will  not  take  a  position  antagonistic 
to  his  principal,  of  accounting  for  proceeds,  and  of  acting  in  person 
unless  otherwise  authorized. 

To  third  persons,  the  principal  is  liable  upon  all  contracts  made 
by  the  agent  within  the  scope  of  his  actual  or  ostensible  authority. 
Ostensible  authority  is  the  authority  created  by  estoppel,  and  is 
consequently  not  available  as  a  ground  of  liability  to  a  person  who 
has  notice  of  the  limits  of  the  actual  authority. 

Actual  authority  includes  powers  expressly  conferred,  those 
reasonably  incidental  to  powers  conferred,  and  those  annexed  by 
custom,  which  must  be  reasonable,  not  contrary  to  positive  law, 
well  established,  and  publicly  known. 

Ostensible  authority  includes  all  those  powers  which  the  third 
party  reasonably  believes  the  agent  to  possess  on  account  of  the 
holding  out  by  the  principal  that  the  agent  is  clothed  with  them. 
These  powers  differ  with  the  nature  of  the  agency  as  well  as  with 
the  particular  acts  of  the  principal  which  justify  the  third  party 
in  the  belief  that  the  power  exists.  They  usually  depend  upon 
the  particular  facts  of  each  case  and  are  therefore  matters  for  the 
jury.  In  the  ordinary  commercial  transactions,  however,  the  limi- 
tations of  ostensible  authority  have  at  the  present  time  become 
fairly  accurately  defined. 

A  public  body  is  not  liable  for  acts  of  public  servants  done 
under  ostensible  authority,  as  the  law  does  not  allow  this  form 
of  estoppel  to  operate  against  the  public.  The  reason  for  the  rule 
is  often  stated  to  be  that  it  is  better  for  an  individual  to  suffer 
occasionally  than  for  the  public  to  suffer  through  collusion  with 
a  dishonest  agent. 

The  principal  is  liable  for  the  torts  of  his  agent  committed 
within  the  scope  of  his  authority  and  in  the  execution  of  his  em- 
ployment. Within  like  limits,  the  master  is  liable  for  the  torts  of 
his  servant.  By  the  better  rule,  it  makes  no  difference  whether  it 
was  for  the  benefit  of  the  agent  or  servant  alone  that  the  tort  was 
committed. 

An  agent  who  has  contracted  on  behalf  of  a  principal  is  not 
personally  liable  if  he  was  duly  authorized.  If  authority  was 
lacking,  however,  he  may  be  held  liable  to  third  persons  who  had 
no  knowledge  of  the  limits  of  his  powers,  upon  the  theory  that 
he  warrants  his  authority  by  making  the  contract  with  them.  In 
tlie  case  of  torts,  the  agent  may  always  be  personally  held  if  the 
third  party  so  elects. 


442  COMMERCIAL   LAW    CASES 

A.    Mutual  Rights  and  Duties  of  Principal  and  Agent. 
I.     Duty  of  Principal  to  Compensate  and  Indemnify  Agent. 

Bibb  V.  Allen.  149  U.  S.  481. 

Allen  &  Company  sue  Bibb  &  Company  for  commissions  and 
expenses  arising  out  of  the  sale  of  cotton  for  future  delivery  on 
the  New  York  Cotton  Exchange.  The  defense  is  made  that  cer- 
tain contracts  were  within  the  statute  of  frauds  and  that  Allen  & 
Company  should  have  refused  to  execute  them  after  discovering 
that  a  loss  would  be  incurred. 

Held,  that  an  agent  has  a  right  to  be  reimbursed  for  all  ad- 
vances and  to  be  paid  for  his  services. 

Jackson,  J. 

If  the  statute  of  frauds  was  not  complied  with,  in  making  the 
sale  contracts  in  the  present  case,  we  do  not  see  that  the  defendant 
[Bibb]  was  in  a  position  to  take  advantage  thereof,  or  that  such  want 
of  compliance  with  the  statute,  after  the  contracts  were  executed,  would 
constitute  any  defense  to  the  action.  The  suit  was  not  brought  on 
these  contracts  of  sale,  which  the  plaintifif  in  error  claims  were  void- 
able under  the  New  York  statute  of  frauds.  It  is  an  action  by  the 
agents  against  their  principal  to  recover  for  work  and  labor  per- 
formed, and  money  paid  out  at  the  principal's  instance  and  request, 
and  in  the  settlement  of  the  principal's  business,  in  which  the  agent 
had  authority  to  make  disbursements  for  him.  In  the  present  case 
the  plaintiffs  had,  by  their  contract,  rendered  themselves  personally 
responsible  for  the  losses  which  might,  and  did,  occur  under  the 
contracts  of  sale  made  for  account  of  the  defendant,  and  as  such 
agents  they  are  entitled  to  recover  against  their  principal  the  full 
amount  expended  by  them  for  him  ii.  the  transactions.  If  in  closing 
out  the  contracts  of  sale,  profits  had  leen  realized  on  the  transactions, 
whether  by  reason  of  decline  in  the  price  of  cotton,  or  by  the  purchases 
"to  cover"  the  cotton  sold,  the  brokers  would,  upon  well  settled 
principles,  have  been  liable  to  their  principal  for  the  same.  They 
could  not  have  set  up  or  interposed  as  a  valid  defense  to  such  liability 
vhat  the  contracts  of  sale  out  of  which  the  profits  were  realized  were 
not  enforceable  under  the  statute  of  frauds,  or  were  voidable  by  the 
agents  or  the  purchaser  with  whom  they  contracted.  Neither  can  the 
principal  interpose  such  an  objection  as  against  the  agent's  right  to 
commission  or  to  reimbursement  for  his  outlays,  after  the  execution 
of  contracts,  merely  voidable  for  want  of  writing.  It  is  a  well- 
established  principle,  which  pervades  the  whole  law  of  principal  and 
agent,  that  the  princi])al  is  bound  to  indemnify  the  agent  against  the 
consequences  of  all  acts  done  by  him  in  the  execution  of  his  agency, 
or  in  pursuance  of  the  authority  conferred  upon  him,  when  the  actions 


AGENCY  443 

or  transactions  are  not  illegal.  Speaking  generally,  the  agent  has 
the  right  to  be  reimbursed  for  all  his  advances,  expenses  and  disburse- 
ments incurred  in  the  course  of  the  agency,  made  on  account  of  or 
for  the  benefit  of  his  principal,  wlien  such  advances,  expenses  and 
disbursements  are  reasonable,  and  have  been  properly  incurred  and 
paid  without  misconduct  on  the  part  of  the  agent.  If,  in  obeying 
the  instructions  or  orders  of  the  principal,  the  agent  does  acts  which 
he  does  not  know  at  the  time  to  be  illegal,  the  principal  is  bound  to 
indemnify  him,  not  only  for  expenses  incurred,  but  also  for  damages 
which  he  may  be  compelled  to  pay  to  third  parties.  The  exception 
to  this  rule  is  where  tbe  transaction  for  which  the  agent  is  employed 
is  illegal,  or  contrary  to  good  morals  and  public  policy. 

A  request  to  undertake  an  agency  or  employment,  the  proper 
execution  of  which  does  or  may  involve  expenditure  of  money  on 
the  part  of  the  agent,  operates  as  an  implied  request  on  the  part  of 
the  principal,  not  only  to  make  such  expenditure,  but  also  as  a 
promise  to  repay  it. 

2.     Rights  of  Servant  Wrongfully  Discharged. 

Howard  v.  Daly.  6i  N.  Y.  ^62. 

Daly  made  a  contract  with  the  defendant,  who  agreed  to 
pay  her  a  certain  sum  for  her  services  as  an  actress  for  a  season 
to  commence  September  15.  Before  the  season  opened,  he  refused 
to  accept  her  services.     She  sues  for  breach  of  the  agreement. 

Held,  that  a  servant  who  has  not  yet  commenced  his  service 
is  entitled  to  sue  for  damages  for  breach  of  the  contract  of  em- 
ployment, not  for  wages  to  be  earned  under  the  contract- 

D wight,  C. 

If  a  servant  has  actually  performed  the  service  which  he  has 
agreed  to  render  under  the  contract,  he  has  a  right  to  recover  wages. 
That  would  have  been  true  in  the  case  at  bar  if  the  defendant  had 
received  her  services  for  the  stipulated  period.  Had  he  not  paid  her 
according  to  the  agreement,  her  action  would  have  been  for  the 
fixed  wages.  If,  on  the  other  hand,  she  is  wrongfully  discharged, 
and  the  relation  of  master  and  servant  is  broken  off  as  far  as  he  is 
concerned,  it  is  clear  that  she  cannot  recover  for  wages  in  the  same 
sense  as  if  she  had  actually  rendered  the  service. 

If  a  servant  be  wrongfully  discharged,  he  has  no  action  for  wages, 
except  for  past  services  rendered,  and  for  sums  of  money  that  have 
become  due.  As  far  as  any  other  claim  on  the  contract  is  concerned, 
he  must  sue  for  the  injury  he  has  sustained  by  his  discharge,  in  not 
being  allowed  to  serve  and  earn  the  wages  agreed  upon.  A  servant 
wrongfully  discharged  has  but  two  remedies  growing  out  of  the 
wrongful  act :  ( i )  He  may  treat  the  contract  of  hiring  as  continuing, 
though  broken  by  the  master,  and  may  recover  damages  for  the  breach. 


444  COMMERCIAL    LAW    CASES 

(2)  He  may  rescind  the  contract;  in  which  case  he  could  sue  on  a 
quantum  Dicruit,  for  services  actually  rendered.  These  remedies  are 
independent  of  and  additional  to  his  right  to  sue  for  wages,  for  sums 
actually  earned  and  due  by  the  terms  of  the  contract.  This  last 
amount  he  recovers  because  he  has  completed,  either  in  full  or  in  a 
specified  part,  the  stipulations  between  the  parties.  The  first  two 
remedies  pointed  out  are  appropriate  to  a  wrongful  discharge. 

To  apply  these  principles  to  the  case  at  bar,  the  plaintiff  must 
have  been  ready  and  willing  to  continue  in  the  defendant's  service  at 
the  time  of  the  latter's  refusal  to  receive  her  into  his  employment. 
It  is  not  necessary,  however,  that  she  should  go  through  the  barren 
form  of  offering  to  render  the  service.  Her  readiness,  like  any  other 
fact,  may  be  shown  by  all  the  circumstances  of  the  case.  It  sufficiently 
appeared  by  the  conduct  of  the  parties. 

The  whole  discussion  may  now  be  summed  up.  If  the  defendant 
in  the  case  at  bar  repudiated  his  contract  with  the  plaintiff  after  the 
time  of  performance  had  arrived,  the  plaintiff  had  an  action  for 
damages.  Her  interview  with  the  defendant  sufficiently  showed  her 
readiness  to  perform.  Pier  action  was  for  damages  for  not  being 
permitted  to  work,  and  not  for  wages;  and  the  defendant  might  show 
affirmatively,  and  by  way  of  mitigation  of  damages,  that  she  had 
opportunities  to  make  a  theatrical  engagement  elsewhere,  which  she 
did  not  accept.  Without  such  proof  she  was  entitled  to  recover  the 
full  amount  of  the  compensation  stipulated  in  the  contract. 

On  the  other  hand,  if  the  defendant  rejected  the  services  of  the 
plaintiff  before  the  time  for  performance  arrived,  she  had  an  election 
either  to  consider  his  act  as  a  breach  of  an  implied  contract  with  her 
to  take  her  into  his  service,  and  bring  an  immediate  action ;  or  to  wait 
till  the  appointed  day  arrived,  and  then  be  in  readiness  to  render  her 
services.  Her  election  will  be  evidenced  by  her  acts.  Having  made 
no  tender  of  her  services  at  the  appointed  day,  the  presumption  is 
that  she  considered  the  act  of  repudiation  by  the  defendant  as  final, 
and  now  brings  her  action  for  damages.  Her  complaint  in  the  action 
and  the  evidence  taken  at  the  trial  are  sufficient  to  establish  such  a 
claim.  Her  damages  are,  as  on  the  other  hypothesis,  prima  facie  the 
entire  amount  of  her  compensation,  unless  proof  was  offered  in 
mitigation  of  damages,  which  was  not  done. 


3.     Duty  of  Care  for  Safety  of  Employees. 

Brown  v.  Winona  &  St.  Peter  Railroad  Co.   2/  Minn.  162. 

The  plaintiff,  an  employee  of  the  defendant  railroad  company, 
was  injured  by  the  net^lii^cnce  of  Jacks,  a  road  master.  He  seeks 
to  recover  damages  for  his  injury. 

Held,  that  a  master  is  not  liable  for  injuries  occasioned  to  a 
servant  bv  act  of  a  fellow  servant. 


AGENCY  445 

Gilfillan,  C.  J.' 

That  as  a  general  rule  the  master  is  not  liable  to  one  servant  for 
an  injury  caused  by  the  negligence  of  another  servant  in  the  same 
common  employment,  is  held  by  every  court  which  decides  according 
to  the  principles  of  the  common  law.  The  rule  has  strong  considera- 
tions of  public  policy,  as  well  as  private  justice,  to  sustain  it.  In  the 
case  of  a  stranger,  the  rule  respondeat  superior  applies  in  all  its  force. 
In  such  case,  the  act  of  the  servant  within  the  scope  of  his  employment, 
however  inferior  may  be  his  grade  or  authority,  is  the  act  of  the 
master,  and  his  negligence  is  the  negligence  of  the  master,  for  the 
consequences  of  which  the  latter  is  responsible,  as  he  is  for  his 
personal  act  and  negligence.  The  rights  of  the  stranger  against  the 
master  are  not  modified  by  any  contract  relation.  The  duties  and 
rights  of  master  and  servant,  with  respect  to  each  other,  are  controlled 
by  the  contract  of  employment,  which  impliedly  imposes  duties  and 
risks  upon  each.  No  case,  not  governed  by  statute,  holds  the  master 
liable  at  all  events  to  a  servant  injured  by  the  negligence  of  another 
servant  in  the  same  employment.  No  case  intimates  that  the  master 
is  an  insurer  of  the  servant  against  possible  injury. 

The  duties  which  the  contract  of  employment  imposes  on  the 
master  are  that,  where  machinery  or  instrumentalities  are  to  be  used 
in  the  work,  he  will  exercise  due  care  and  caution  in  providing  such 
as  are  fit  and  safe;  and,  where  co-servants  are  to  be  employed,  he 
will  use  due  care  and  caution  in  selecting  such  as  are  competent  and 
careful.  For  injuries  arising  from  failure  to  perform  these  duties 
the  master  is  liable,  and  he  cannot  avoid  the  liability  by  deputing 
another  to  perform  them  in  his  stead.  There  are  cases  which  appear 
to  add  to  these  duties  the  duty  not  to  have  the  servant  set,  either  by 
the  master  or  by  one  whom  he  places  in  authority  over  him,  to  do 
work  more  dangerous  than  he  engaged  to  do,  or  to  do  unusually 
hazardous  work,  where,  from  youth  fulness  or  feebleness  of  intellect, 
the  servant  may  be  supposed  to  be  unable  to  appreciate  the  danger 
and  guard  against  it,  or  the  hazards  of  which  are  known  to  the 
master,  but  are  unknown  to.  and  not  open  to  the  observation  of,  the 
servant.  There  is  nothing  in  this  case  to  make  it  necessary  for  us 
to  decide  on  these  propositions,  or  do  more  than  allude  to,  without 
expressing  any  opinion  on,  them. 

All  the  authorities,  where  there  is  no  statute  on  the  subject,  agree 
that  in  the  contract  of  employment  the  servant  assumes  such  risks  as — 
the  master  having  performed  the  duties  we  have  mentioned — are  still 
necessarily  incident  to  the  business  or  work  which  he  engages  to  do, 
and  which  risks  he  may  be  taken  to  have  in  mind  when  he  enters  the 
employment.  Where  he  is  to  work  with  or  about  machinery,  as, 
notwithstanding  any  degree  of  care  in  providing  it,  there  is  still, 
ordinarily,  the  possibility  of  injury  from  its  use,  he  must  be  supposed 
to  take  that  risk  on  himself;  and  because,  notwithstanding  the  utmost 
care  and  caution  in  selecting  them,  there  is  danger  of  injury  from 
the   negligence   of    fellow-servants,   he   is   held   to   assume   that   risk. 


44^  COMMERCIx\L    LAW    CASES 

These  are  risks  which  are  necessarily  incident  to  the  employment. 
If  a  workman  or  servant  is  to  work  in  conjunction  with  others,  he 
must  know  that  the  carelessness  of  his  fellow-servants  may  be  pro- 
ductive of  injury  to  himself,  and  he  must  know  that  neither  care 
nor  diligence  by  the  master  can  prevent  the  want  of  due  care  and 
caution  on  the  part  of  his  fellow-servants.  The  servant,  on  entering 
upon  the  employment,  is  supposed  to  know  and  assume  this  risk. 
The  reason  given  for  holding  the  servant  to  assume  the  risk  of  injury 
from  negligence  of  his  fellow-servants — to  wit,  that  he  must  know, 
when  he  enters  upon  the  employment,  that  neither  care  nor  dili- 
gence by  the  master  can  prevent  it — we  think  indicates  what 
servants  are  to  be  regarded  as  fellow-servants,  the  risk  of 
whose  negligence  is  assumed  by  a  servant  when  entering  upon 
the   employment. 

It  is  upon  this  point  that  the  authorities  disagree.  Some  courts 
hold  that  where  the  injured  servant  is  subordinate  to  him  whose 
negligence  causes  the  injury,  they  are  not  "fellow-servants,"  and  the 
master  is  liable.  On  the  other  hand,  the  great  majority  of  courts 
both  in  this  country  and  in  England  hold  that  mere  difference  in 
grade  of  employment,  or  in  authority,  with  respect  to  each  other, 
does  not  remove  them  from  the  class  of  fellow-servants  as  regards 
the  liability  of- the  master  for  injuries  to  one  caused  by  the  negligence 
of  the  other.  If  the  servant  is  supposed  to  assume  the  risks  which 
the  master,  with  due  care  and  diligence,  cannot  prevent,  and  we 
think  it  is  so,  then  he  assumes  the  risks  from  negligence  of  those 
servants  who  may  be  placed  over  him  as  superior  servants  or  over- 
seers, as  vv^ell  as  of  those  of  equal  grade  with  himself.  For,  in 
respect  to  such  overseers  or  superior  servants,  the  master,  when  he 
has  used  due  care  in  selecting  them,  cannot  prevent  their  casual 
negligence  any  more  than  he  can  prevent  the  casual  negligence  of 
those  inferior  in  grade.  This  conclusion  is  decisive  of  this  case, 
for  the  road-master  was  no  more  than  a  superior  servant  or  overseer, 
the  risk  of  whose  negligence  was  assumed  by  plaintiff  when  he 
entered  upon  the  employment. 

4.     Duty  of  Agent  to  Follow  Instructions. 

Heinemann  v.  Heard.  50  N.   Y.  2/. 

Heinemann  &  Payson  instructed  Heard  &  Company  at  Hong 
Kong  to  buy  silk  for  them  at  a  specified  price.  Heard  &  Com- 
pany did  not  buy  at  this  price  when  tliey  could  have  done  so,  as 
tliey  expected  the  market  to  fall.  Tiie  market  rose  and  they  were 
unable  to  make  the  purchase  as  directed.  Heinemann  &  Payson 
sue  Heard  &  Company  for  failure  to  obey  their  instructions  to 
purchase  at  the  si)ecilie(l  price. 

Held,  that  an  agent  must  follow  instructions  given  him  by  his 
principal. 


AGENCY  447 

Rapallo,  J. 

The  question  in  the  case  was  one  of  due  diligence,  and  we  think 
that  there  was  sufficient  evidence  to  go  to  the  jury  on  that  point. 
The  position  cannot  be  maintained  that  fraud  on  the  part  of  the 
agent  is  necessary  to  subject  him  to  an  action  for  neglecting  to  per- 
form a  duty  which  he  has  undertaken.  An  agent  is  bound  not  only 
to  good  faith  but  to  reasonable  diligence,  and  to  such  skill  as  is 
ordinarily  possessed  by  persons  of  common  capacity  engaged  in  the 
same  business.  Whether  or  not  he  has  exercised  such  skill  and 
diligence  is  usually  a  question  of  fact ;  but  its  omission  is  equally  a 
breach  of  his  obligation  and  injurious  to  his  principal,  whether  it  be 
the  result  of  inattention  or  incapacity,  or  of  an  intent  to  defraud. 

5.     Duty  to  Exercise  Good  Faith. 

Farnsworth  v.  Hemmer.  i  Allen  (Mass.)  4^4. 

Farnsworth,  a  real  estate  broker,  effected  an  exchange  of  real 
estate  between  Hemmer  and  Mrs.  Cooper.  He  had  been  com- 
missioned by  them  to  exchange  their  respective  properties.  With- 
out the  knowledge  of  either,  he  charged  a  commission  to  both  and 
now  seeks  to  recover  the  one  charged  to  Hemmer. 

Held,  that  an  agent  must  act  in  good  faith  with  his  principal 
and  must  not  represent  the  other  party. 

Bigclow,  C.  J. 

The  principle  on  which  rests  the  well  settled  doctrine  that  a  man 
cannot  become  the  purchaser  of  property  for  his  own  use  and  benefit 
which  is  entrusted  to  him  to  sell,  is  equally  applicable  when  the  same 
person  without  the  authority  or  consent  of  the  parties  interested, 
undertakes  to  act  as  the  agent  of  both  vendor  and  purchaser.  The 
law  does  not  allow  a  man  to  assume  relations  so  essentially  inconsistent 
and  repugnant  to  each  other.  The  duty  of  an  agent  for  a  vendor  is 
to  sell  the  property  at  the  highest  price ;  of  the  agent  of  the  purchaser 
to  buy  it  for  the  lowest.  These  duties  are  so  utterly  irreconcilable 
and  conflicting  that  they  cannot  be  performed  by  the  same  person 
without  great  danger  that  the  rights  of  one  principal  will  be  sacrificed 
to  promote  the  interests  of  the  other,  or  that  neither  of  them  will 
enjoy  the  benefit  of  a  discreet  and  faithful  exercise  of  the  trust 
reposed  in  the  agent.  As  it  cannot  be  supposed  that  a  vendor  and 
purchaser  would  employ  the  same  person  to  act  as  their  agent  to 
buy  and  sell  the  same  property,  it  is  clear  that  it  operates  as  a  surprise 
on  both  parties,  and  is  a  breach  of  the  trust  and  confidence  intended 
to  be  reposed  in  the  agent  by  them  respectively,  if  his  intent  to  act 
as  agent  of  both  in  the  same  transaction  is  concealed  from  them. 
It  is  of  the  essence  of  his  contract  that  he  will  use  his  best  skill  and 
judgment  to  promote  the  interests  of  his  employer.     This  he  cannot 


448  COMMERCIAL    LAW    CASES 

do,  where  he  acts  for  two  persons  whose  interests  are  essentially 
adverse.  He  is  therefore  guilty  of  a  breach  of  his  contract.  Nor 
is  this  all.  He  commits  a  fraud  on  his  principals  in  undertaking, 
without  their  consent  or  knowledge,  to  act  as  their  mutual  agent, 
because  he  conceals  from  them  an  essential  fact,  entirely  within  his 
own  knowledge,  which  he  was  bound  in  the  exercise  of  good  faith 
to  disclose  to  them. 

6.     Duty  to  Act  in  Person  Unless  Otherwise  Authorized. 

Exchange  National  Bank  of  PiftsbiirgJi  z'.  TJiird  National 
Bank  of  Neiv  York.  112  U.  S.  2 yd. 

The  Exchange  Bank  of  Pittsburgh  sent  drafts  to  the  Third 
National  Bank  of  New  York  to  be  collected  from  the  drawee,  the 
Newark  Tea  Tray  Company  of  Newark.  The  New  York  Bank 
sent  the  drafts  to  the  First  National  Bank  of  Newark,  which 
allowed  them  to  be  accepted  personally  by  the  Secretary  of  the 
Tray  Company,  instead  of  by  the  corporation  itself.  Subse- 
quently, the  drafts  were  not  paid,  and  the  Exchange  Bank  sues 
the  New  York  Bank  for  not  obtaining  acceptance  by  the  drawee 
or  protesting  the  drafts  if  acceptance  were  reftised. 

Held,  that  according  to  the  United  States  rule,  a  bank  which 
takes  a  draft  for  collection  is  liable  for  the  negligence  of  a  corre- 
spondent bank  to  which  it  entrusts  that  collection. 

Blatchford,  J. 

It  is  contended  by  the  defendant  that  its  liability,  in  taking  at 
New  York  for  collection  these  drafts  on  a  drawee  at  Newark,  extended 
merely  to  the  exercise  of  due  care  in  the  selection  of  a  competent 
agent  at  Newark,  and  to  the  transmission  of  the  drafts  to  such  agent, 
with  proper  instructions;  and  that  the  Newark  bank  was  not  its  agent, 
but  the  agent  of  the  plaintiff,  so  that  the  defendant  is  not  liable  for 
tlie  default  of  the  Newark  bank,  due  care  having  been  used  in 
selecting  that  bank.  Such  would  be  the  result  of  the  rule  established 
in  Massachusetts.  The  authorities  which  support  this  rule  rest  on 
the  proposition  that,  since  what  is  to  be  done  by  a  bank  employed 
to  collect  a  draft  payable  at  another  place  cannot  be  done  by  any 
of  its  ordinary  ofiiccrs  or  servants,  but  must  be  entrusted  to  a  sub- 
agent,  the  risk  of  the  neglect  of  the  sub-agent  is  upon  the  party 
employing  the  bank,  on  the  view  that  he  has  impliedly  authorized 
tlie  emphntnent  of  the  subagent ;  and  that  the  incidental  benefit 
which  the  bank  may  receive  from  collecting  the  draft,  in  the  absence 
of  an  express  or  imijhcd  agreement  for  compensation,  is  not  a  sufficient 
consideration  from  which  to  legally  infer  a  contract  to  warrant  against 
loss  from  the  ncghgcnce  of  the  subagent. 

The  contrary  doctrine,  that  a  bank  receiving  a  draft  or  bill 
of    exchange    in    one    state    for   collection    in   another    state    from   a 


AGENCY  449 

drawee  residing  there,  is  liable  for  neglect  of  duty  occurring  in  its 
collection,  whether  arising  from  the  default  of  its  own  officers  or  from 
that  of  its  correspondent  in  the  other  state,  or  an  agent  employed  by- 
such  correspondent,  in  the  absence  of  any  express  or  implied  contract 
varying  such  liability,  is  established  by  decisions  in  New  York  and 
elsewhere. 

The  agreement  of  the  defendant  in  this  case  was  to  collect  the 
drafts,  not  nierly  to  transmit  them  to  the  Newark  bank  for  collection. 
This  distinction  is  manifest;  and  the  question  presented  is,  whether 
the  New  York  bank  first  receiving  these  drafts  for  collection  is 
responsible  for  the  loss  or  damage  resulting  from  the  default  of  its 
Newark  agent. 

The  distinction  between  the  liability  of  one  who  contracts  to  do 
a  thing  and  that  of  one  who  merely  receives  a  delegation  of  authority 
to  act  for  another  is  a  fundamental  one,  applicable  to  the  present  case. 
If  the  agency  is  an  undertaking  to  do  the  business,  the  original  prin- 
cipal may  look  to  the  immediate  contractor  with  himself,  and  is  not 
obliged  to  look  to  inferior  or  distant  undercontractors  or  subagents 
when  defaults  occur  injurious  to  his  interest. 

Whether  a  draft  is  payable  in  the  place  where  the  bank  receiving 
it  for  collection  is  situated,  or  in  another  place,  the  holder  is  aware 
that  the  collection  must  be  made  by  a  competent  agent.  In  either 
case,  there  is  an  implied  contract  of  the  bank  that  the  proper  measures 
shall  be  used  to  collect  the  draft,  and  a  right,  on  the  part  of  its  owner, 
to  presume  that  proper  agents  will  be  employed,  he  having  no 
knowledge  of  the  agents.  There  is,  therefore,  no  reason  for  liability 
or  exemption  from  liability  in  the  one  case  which  does  not  apply  to 
the  other.  And,  while  the  rule  of  law  is  thus  general,  the  liability 
of  the  bank  may  be  varied  by  consent,  or  the  bank  may  refuse  to 
undertake  the  collection.  It  may  agree  to  receive  the  paper  only 
for  transmission  to  its  correspondent,  and  thus  make  a  different  con- 
tract, and  become  responsible  only  for  good  faith  and  due  discretion 
in  the  choice  of  an  agent.  If  this  is  not  done,  or  there  is  no  implied 
understanding  to  that  effect,  the  same  responsibility  is  assumed  in 
the  undertaking  to  collect  foreign  paper  and  in  that  to  collect  paper 
payable  at  home.  On  any  other  rule,  no  principal  contractor  would 
be  liable  for  the  default  of  his  own  agent  where  from  the  nature 
of  the  business  it  was  evident  he  must  employ  subagents.  The 
distinction  recurs  between  the  rule  of  merely  personal  representative 
agency  and  the  responsibility  imposed  by  the  law  of  commercial 
contracts.  This  solves  the  difficulty  and  reconciles  the  apparent  con- 
flict of  decision  in  many  cases.  The  nature  of  the  contract  is  the 
test.  If  the  contract  be  only  for  the  immediate  services  of  the  agent, 
and  for  his  faithful  conduct  as  representing  his  principal,  the  respon- 
sibility ceases  with  the  limits  of  the  personal  services  undertaken. 
But  where  the  contract  looks  mainly  to  the  thing  done,  and  the  under- 
taking is  for  the  due  use  of  all  proper  means  of  performance,  the 
responsibility  extends  to  all  necessary  and  proper  means  to  accomplish 
the  object,  by  whomsoever  used. 


450  COMMERCIAL    LAW    CASEb 

By  the  receipt  by  the  defendant  of  the  drafts  in  the  present 
case  for  collection,  it  became,  upon  general  principles  of  law,  and 
independently  of  any  evidence  of  usage,  or  of  any  express  agreement 
to  that  effect,  liable  for  a  neglect  of  duty  occurring  in  that  collection 
from  the  default  of  its  correspondent  in  Newark. 


7.     Liability  of  Gratuitous  Agent. 

Thome  v.  Deas.  4  Johns.  (N.  Y.)  84. 

The  plaintiffs  owned  one-half  of  a  vessel  and  the  defendant, 
the  other  half.  The  defendant  agreed  to  insure  the  vessel  for  the 
benefit  of  both  parties,  but  neglected  to  do  so.  The  ship  was 
wrecked,  and  the  plaintififs  sue  the  defendant  for  his  negligence 
in  failing  to  effect  the  insurance. 

Held,  that  while  a  gratuitous  agent  is  liable  for  misfeasance, 
he  is  not  liable  for  nonfeasance. 

Ketit,  C.  J. 

The  offer,  on  the  part  of  the  defendant,  to  cause  insurance  to  be 
effected,  was  perfectly  voluntary.  Will,  then,  an  action  lie,  when  one 
party  entrusts  the  performance  of  a  business  to  another,  who  under- 
takes to  do  it  gratuitously,  and  wholly  omits  to  do  it?  If  the  party 
who  makes  this  engagement  enters  upon  the  execution  of  the  business, 
and  does  it  amiss  through  the  want  of  due  care,  by  which  damage 
ensues  to  the  other  party,  an  action  will  lie  for  this  misfeasance. 
But  the  defendant  never  entered  upon  the  execution  of  his  under- 
taking, and  the  action  is  brought  for  the  nonfeasance. 

A  short  review  of  the  leading  cases  will  show  that  by  the  common 
law,  a  mandatary,  or  one  who  undertakes  to  do  an  act  for  another 
without  reward,  is  not  answerable  for  omitting  to  do  the  act,  and  is 
only  responsible  when  he  attempts  to  do  it,  and  does  it  amiss.  In 
other  words,  he  is  responsible  for  a  misfeasance,  but  not  for  a  non- 
feasance, even  though  special  damages  are  averred. 

If  the  defendant  had  been  a  broker,  whose  business  it  was  to 
procure  insurances  for  others,  upon  a  regular  commission,  the  case 
might  possibly  have  been  different.  It  is  very  clear,  from  this  case, 
that  the  defendant  undertook  to  have  the  insurance  effected,  as  a 
voluntary  and  gratuitous  act,  without  the  least  interest  in  the  vessel 
with  the  plaintiffs,  and  what  he  undertook  to  do  was  as  much  for 
his  own  benefit  as  theirs.  It  might  as  well  be  said  that,  whenever 
one  partner  promises  his  cojiartner  to  do  any  particular  act  for  the 
common  benefit,  he  becomes  in  that  instance  a  factor  to  his  copartner, 
and  entitled  to  a  commission.  The  plaintiffs  have,  then,  failed  in 
their  attempt  to  bring  this  case  within  the  range  of  the  decisions  or 
within  any  principle  which  gives  an  action  against  a  commercial 
agent  who  neglects  to  insure  for  his  correspondent.     Upon  the  whole 


AGENCY  451 

view  of  the  case,  therefore,  we  are  of  opinion  that  the  defendant  is 
entitled  to  judgment. 

B.     Ostensible  Authority  of  Agent. 

I.     Agent  to  Sell :  To  Fix  Terms  of  Sale. 

Daylight  Burner  Co.  v.  Odlin.  51  N .  H.  56, 

Moore,  who  was  selling  goods  for  the  plaintiff  under  authority 
to  sell  for  cash  only,  sold  to  Berry  on  credit.  The  plaintiff  shipped 
the  goods  C.O.D.  by  the  defendant,  an  expressman,  who  delivered 
them  to  Berry  upon  an  order  from  Moore  gtating  that  the  goods 
should  be  delivered  without  payment  of  the  purchase  price.  The 
Burner  Company  sues  for  the  delivery  of  the  goods  without 
receiving  the  purchase  price. 

Held,  that  an  agent  to  sell  has  ostensible  authority  to  fix  the 
terms  of  the  sale. 

Bellows,  C.  J. 

From  the  uncontradicted  testimony  of  the  plaintiff  and  the  finding 
of  the  jury,  it  may  be  assumed  that  Moore  was  clothed  by  the  plaintiff 
with  an  apparent  authority,  like  that  of  a  factor,  to  sell  all  the  goods 
of  the  plaintiff  he  could  sell  within  his  business  circuit,  on  a  com- 
mission of  ten  per  cent. 

As  incident  to  that  general  authority,  he  had  power  to  fix  the 
terms  of  sale,  including  the  time,  place,  and  mode  of  delivery,  and 
the  price  of  the  goods,  and  the  time  and  mode  of  payment,  and  to 
receive  payment  of  the  price,  subject  of  course  to  be  controlled  by 
proof  of  the  mercantile  usage  in  such  trade  or  business. 

There  is  some  conflict  in  the  adjudged  cases  upon  the  question 
of  the  authority  of  a  factor  to  sell  on  credit,  but  we  think  the  weight 
of  modern  authority  is  in  favor  of  the  position  that  he  may  sell  on 
credit,  unless  a  contrary  usage  is  shown. 

We  have  a  case,  then,  where  the  agent  was  apparently  clothed 
with  the  authority  to  sell  the  plaintiff's  goods,  without  limitation  as 
to  the  quantity,  and  on  commission,  for  cash  or  on  credit,  as  he  might 
think  proper ;  and  this  being  so,  Moore  must  be  regarded,  in  respect 
to  third  persons,  as  the  plaintiff's  agent,  whose  authority  would  not 
be  limited  by  instructions  not  to  be  brought  to  the  notice  of  such  third 
persons. 

As  Moore,  then,  in  respect  to  third  persons,  had  the  power  to 
sell  on  credit,  the  authority  to  control  the  delivery  of  the  goods  so 
sold  and  sent  to  his  order,  for  the  purpose  of  making  it  conform 
to  the  contract  of  sale,  would  necessarily  come  within  the  scope  of  his 
agency;  and  we  think  his  order  to  the  defendant  would  justify  a 
delivery  of  the  goods  without  payment,  unless  he  had  notice  of  the 


452  COMMERCIAL    LAW    CASES 

agent's  want  of  authority.     As  to  him  the  agent's  apparent  authority 
was  real  authority. 

The  marking  of  the  package  by  another  agent  of  the  plaintiff, 
to  the  effect  that  cash  was  required  on  delivery,  was  not  in  law  notice 
of  such  want  of  authority,  although  it  might  be  sufficient  to  put  the 
defendant  upon  inquiry.  That,  however,  was  properly  left  to  the 
jury,  and  they  have  found  it  not  to  be  sufficient  for  that  purpose. 

2.     Agent  to  Sell:   Warranty. 

Herring  v.  Skaggs.  62  Ala.  180. 

Stewart,  a  salesman  of  Herring's  firm,  sold  Skaggs  a  safe,  war- 
ranting it  to  be  over  a  certain  thickness,  and  burglar  proof.  Bur- 
glars took  money  and  valuables  from  the  safe  with  little  difficulty. 
Skaggs  sues  on  the  warranty. 

Held,  that,  in  the  absence  of  custom,  an  agent  to  sell  has  no 
implied  authority  to  warrant. 

Stone,  J. 

We  are  not  prepared  to  assent  to  the  doctrine  in  unlimited  sense, 
that  a  general  agent  to  sell  has,  by  virtue  thereof,  the  power  to  bind 
his  principal  by  every  species  of  warranty  a  purchaser  may  exact. 
"Warranties  are  sometimes  given  by  agents,  without  express  authority 
to  that  effect.  In  such  cases  the  question  arises  as  to  the  power  of 
an  agent,  who  is  authorized  to  sell,  to  bind  his  principal  by  a  war- 
ranty. The  general  rule  is,  as  to  all  contracts  including  sales,  that 
the  agent  is  authorized  to  do  whatever  is  usual  to  carry  out  the  object 
of  his  agency,  and  it  is  a  question  for  the  jury  to  determine  what 
is  usual.  If  in  the  sale  of  the  goods  confided  to  him,  it  is  usual 
in  the  market  to  give  a  warranty,  the  agent  may  give  that  warranty 
in  order  to  effect  a  sale."  As  a  general  rule,  the  agent  has  power 
to  do  whatever  is  usual — to  enter  into  such  express  stipulations  as  are 
usual  and  customary — in  effecting  such  sales.  What  stipulations  are 
usual  and  customary  in  effecting  such  sales,  is  ftot  always  matter 
of  judicial  knowledge.  It  cannot  be  affirmed  that  the  custom  of 
giving  warranties  exists  in  the  sale  of  all  chattels.  Generally,  and 
we  hold  in  a  sale  like  the  present,  it  is  a  question  for  the  jury  to 
determine  what  is  usual.  This,  in  the  absence  of  express  authority 
in  the  agent  to  warrant;  for  if  the  agent  had  such  express  authority, 
then  his  act  is  the  act  of  his  principal.  And,  in  the  absence  of  express 
authority,  the  question  arises,  and  it  is  one  for  the  jury,  whether 
such  warranty  is  customary  in  the  sale  of  safes.  If  the  jury,  on 
the  evidence,  find  there  was  such  custom,  then  the  principal  is  bound, 
"in  the  absence  of  prohibition"  resting  on  the  agent,  and  brought  to 
the  knowledge  of  the  i)urchaser,  to  the  same  extent  as  if  the  principal 
had  himself  given  the  warranty.  On  the  other  hand,  if  there  was 
no  such  authority  given,  and  no  such  custom  found  to  exist,  then  the 
princii)al  would  not  be  bound.     True,  if  the  principal  ratified  the  act 


AGENCY  453 

of  such  agent,  although  the  act  itself  had  been  unauthorized,  this 
would  bind  the  principal.  But  the  receipt  of  the  purchase-money 
would  have  no  such  effect,  unless  received  or  retained  with  knowledge 
that  the  agent  had  given  the  warranty. 

The  sale  in  the  present  case  was  made  by  an  agent.  In  the 
absence  of  proof  of  express  authority  to  warrant,  it  was  incumbent 
on  the  plaintiff  to  show  a  custom  in  the  sale  of  safes,  to  warrant 
them  as  burglar  proof.  Either  the  express  authority,  or  the  authority 
implied  from  such  proven  custom,  would  constitute  the  act  of  the 
agent  the  act  of  the  principal ;  but  the  law  does  not  imply  the 
authority  from  the  fact  that  Stewart,  who  conducted  the  sale,  was 
a  general  agent. 

3.  Agent  to  Sell:  To  Receive  Payment. 

Higgins  v.  Moore.  ^4  N.   Y.  41/. 

Higgins  sold  Moore  a  cargo  of  rye  through  a  grain  broker. 
Moore  paid  the  price  to  the  broker,  who  did  not  remit  to  Higgins. 
Higgins'  firm  now  sues  for  the  price. 

Held,  that  an  agent  to  sell,  who  has  not  possession  of  the  goods, 
has  no  ostensible  authority  to  receive  the  purchase  price. 

Peckham,  J. 

The  general  doctrine  is,  that  a  broker  employed  to  sell  has  no 
authority  as  such  to  receive  payment.  Exception  is  made  to  this 
general  rule  in  some  cases  where  the  principal  is  not  disclosed.  An 
agent  to  conclude  a  contract  is  not,  of  course,  authorized  to  receive 
payment  thereunder. 

Where  the  person  contracting  for  the  sale  has  the  property  in 
his  possession,  and  delivers  it,  he  is  clothed  with  the  indicia  of 
authority  to  receive  payment,  especially  when  the  owner  is  not  known. 
He  is  then  clothed  with  apparent  authority,  and  that,  as  to  third 
persons,  is  the  real  authority. 

In  the  case  at  bar,  however,  the  broker  never  had  possession 
of  the  rye,  and  never  delivered  it ;  but  the  plaintiffs  retained  posses- 
sion till  they  delivered  to  the  defendant,  and  they  were  well  known 
to  the  defendant ;  one  of  them  had  taken  part  in  the  negotiation  for  the 
sale,  as  owner,  in  the  city  of  New  York.  The  broker  was  simply 
authorized  to  make  a  contract  for  the  sale.  This  was  the  whole 
of  his  authority  in  reality,  and  he  had  no  other  or  further  apparent 
authority. 

4.  Agent  to  Sell:   Payment  of  Commission. 

Hibhard,  Spencer  &  Bartlett  v.  Peek.  75  Wis.  6ig. 

Bennet,  a  traveling  salesman  in  the  employ  of  the  plaintiflfs, 
sold  goods  to  Peek.     In  an  action  for  the  purchase  price,  Peek  sets 


454  COMMERCIAL   LAW    CASES 

up  in  part  satisfaction  of  the  debt  an  agreement  between  Bennet 
and  himself,  that  if  Peek  would  assist  in  securing  a  certain  order 
from  Nelson,  he  would  be  paid  a  commission  for  so  doing. 

Held,  that  a  principal  is  not  bound  by  a  salesman's  agreement 
to  pay  a  commission  to  a  third  party. 

Cole,  C.  J. 

The  plaintiff  never  gave  its  traveling  salesmen  any  authority 
whatever  to  grant  commissions,  or  even  credits,  on  goods  sold  by 
them.  It  is  clear,  therefore,  that  Bennet  had  no  express  authority 
to  bind  his  principal  to  pay  the  defendant  commissions  on  goods  sold 
Nelson,  even  if  such  a  contract  were  made. 

Had  he  an  implied  authority,  growing  out  of  the  usage  or  custom 
in  the  hardware  trade,  to  render  his  principal  liable  for  such  com- 
missions ? 

The  authority  of  an  agent  in  any  given  case  is  incident  to  the 
character  bestowed  upon  him  by  the  principal.  If  the  principal  has, 
by  his  express  act  or  as  the  logical  result  of  his  words  or  conduct, 
impressed  upon  the  agent  the  character  of  one  authorized  to  act  and 
speak  for  him  in  a  given  capacity,  authority  so  to  speak  and  act 
follows  as  a  necessary  incident  of  the  character,  and  the  principal, 
having  conferred  the  character,  will  not  be  heard  to  assert,  as  against 
third  parties  who  have  relied  thereon  in  good  faith,  that  he  did  not 
intend  to  impose  so  much  authority,  or  that  he  had  given  the  agent 
express  directions  not  to  exercise  it;  and  where  the  principal  confers 
upon  the  agent  an  authority  of  a  kind,  or  empowers  him  to  transact 
business  of  a  nature,  in  reference  to  which  there  is  a  well-defined 
and  publicly  known  usage,  it  is  the  presumption  of  law,  in  the  absence 
of  anything  to  indicate  a  contrary  intent,  that  the  authority  was 
conferred  in  contemplation  of  the  usage.  The  usage  of  a  particular 
trade  or  business,  or  of  a  particular  class  of  agents,  may  be  shown, 
not  for  the  purpose  of  enlarging  the  powers  of  the  agent  employed 
therein,  but  for  the  purpose  of  interpreting  those  powers  which  are 
actually  given;  for  the  means  ordinarily  used  to  execute  the  authority 
are  included  in  the  power,  and  may  be  resorted  to  by  all  agents,  and 
especially  by  commercial  agents. 

But  the  evidence  of  the  usage,  in  a  case  like  this,  should  be  clear 
and  satisfactory,  and  should  show  that  the  usage  has  so  long  con- 
tinued, and  has  been  so  uniform,  that  merchants  in  that  kind  of 
business  may  be  presumed  to  authorize  their  agents  to  sell  their 
goods  in  the  ordinary  way  in  which  such  goods  are  sold,  and  in 
reference  to  such  custom.  The  evidence  in  the  present  case,  falls 
far  short  of  establishing  the  usage  or  custom  in  the  hardware  business 
of  traveling  salesmen  making  contracts  on  behalf  of  their  principals 
to  pay  commissions  to  third  parties  for  aid  in  procuring  orders  from 
those  to  whom  goods  are  sold.  It  is  quite  clear  that  the  defendant's 
recommendation  sent  to  Nelson  did  not  have  any  influence  upon  the 
latter  in  inducing  him  to  make  the  purchase  he  did;  but,  had  the  fact 
been  otherwise,  we  do  not  think  the  plaintiff  was  bound  by  the  contract 


AGENCY  455 

of.  Bennet  to  pay  the  defendant  the  commission  he  claims,  as  it  was 
beyond  the  scope  of  his  authority  to  make  such  a  contract. 

5.  Agent  to  Sell :   Exchange. 

Taylor  &  Farley  Organ  Co.  v.  Star  key.  59  N.  H.  142. 

The  Organ  Company  sues  to  recover  the  value  of  an  organ 
vi^hich  was  delivered  to  Starkey  by  Davis,  an  agent  of  the  plain- 
tiff, who  was  authorized  to  sell  on  commission.  Davis  exchanged 
the  organ  for  a  buggy  and  $40  in  cash. 

Held,  that  an  agent  to  sell  has  no  authority  to  exchange. 

Stanley,  J. 

The  contract  between  the  plaintiffs  and  Davis  was  properly 
admitted.  It  was  evidence  of  the  agreement  under  which  Davis  was 
in  possession,  and  tended  to  show  that  his  authority  was  to  sell,  and 
not  to  exchange.  In  the  absence  of  evidence  to  the  contrary,  to  sell 
means  to  sell  for  cash.  Davis,  having  no  authority  except  to  sell 
for  cash,  could  not  lawfully  exchange  for  other  property,  either  in 
whole  or  in  part,  and  if  he  did  the  title  would  not  pass,  for  the 
plaintiffs  did  not  hold  Davis  out,  or  authorize  him  to  hold  himself 
out,  as  owner  of  the  organ. 

6.  Agent  to  Sell :  To  Rescind  Sale. 

American  Sales  Book  Co.  v.  Whitaker.  100  Ark.  ^60. 

The  plaintiflf  had  sold  supplies  to  Whitaker  through  a  traveling 
salesman,  who  afterwards  rescinded  the  sale.  The  Sales  Book 
Company  refuses  to  recognize  the  authority  of  the  salesman  to 
rescind  the  sale  when  once  made,  and  sues  to  recover  the  purchase 
price. 

Held,  that  an  agent  to  sell  has  no  authority  to  rescind  a  sale 
when  once  made. 

Frauenthal,  J. 

It  is  well  settled,  we  think,  that  the  power  which  an  agent  has 
to  bind  his  principal  rests  upon  the  authority  which  the  principal  has 
given  to  him.  If  the  agent  has  acted  without  authority,  or  outside 
of  the  scope  of  his  authority,  real  or  apparent,  then  the  principal  is 
not  bound  for  such  act.  One  who  deals  with  an  agent  is  at  once 
put  upon  inquiry,  and  must  discover  whether  the  agent  has  the 
authority  to  do  the  proposed  act.  But  where  the  agency  is  proved, 
without  showing  its  extent,  then  it  is  presumed  that  general  authority 
has  been  given  in  regard  to  the  business  in  which  such  agency  is 
concerned.     Without  notice  to  the  contrary,  the  agent  is  presumed 


45^  COMMERCIAL   LAW    CASES 

to  have  authority  to  do  all  acts  necessary  to  carry  out  the  particular 
employment  in  which  he  is  engaged  by  the  principal. 

This  court  has  held  that  a  third  person  has  a  right  to  assume, 
without  notice  to  the  contrary,  that  the  traveling  salesman  of  a  whole- 
sale house  has  an  unqualified  authority  to  act  for  the  firm  which  he 
represents  in  all  matters  which  come  within  the  scope  of  that 
employment.  The  object  of  the  employment,  and  the  authority,  real 
or  apparent,  given  to  an  agent  who  makes  sales  or  solicits  for  goods. 
is  to  do  all  those  things  and  to  enter  into  such  agreements  as  are 
necessary  to  make  the  sales  or  to  secure  the  orders  for  the  goods. 
He  has  the  authority,  real  or  apparent,  to  agree  upon  the  terms  of 
the  sale  and  to  sell  conditionally  or  unconditionally,  where  the  person 
with  whom  he  deals  has  no  notice  of  any  limitation  upon  his  authority. 
But,  according  to  the  great  weight  of  authority,  an  agent  who  is  only 
empowered  by  his  principal  to  solicit  orders  for,  or  to  make  sales 
of,  goods  has  no  implied  authority  to  receive  payment  therefor  or 
to  modify  or  cancel  such  sales.  After  an  order  is  executed  or  a 
sale  completed,  the  authority  of  the  agent  in  the  matter  is  at  an 
end.  His  authority  is  only  to  make  contracts,  to  solicit  orders  for 
goods,  or  to  make  sales  thereof.  He  has  no  implied  power  to  give 
up  interests  that  have  been  acquired,  or  to  cancel  rights  which  have 
been  obtained.  The  agent  who  solicits  orders  for,  or  makes  sales 
of,  goods  has  no  implied  power,  once  the  order  is  executed  or  the 
sale  made,  either  to  modify  or  to  rescind  the  contract.  It  is  a  well 
settled  rule  that  an  agent  with  authority  to  sell  goods  has  no 
authority,  after  a  contract  of  sale  has  been  completed  or  executed, 
to  revoke  or  rescind  a  sale  and  receive  back  the  goods  which  he 
had  previously  sold,  or  to  alter  his  contract  in  any  material  part. 

7.    Agent  to  Purchase. 

Brit  tain  v.  We  stall,   it.'j  N.  C.  w. 

Westall  authorized  Townsend  to  buy  lumber  for  him  for  cash 
which  he  advanced  for  that  purpose.  Townsend  bought  lumber 
for  him  on  credit  from  the  plaintiff,  and  it  was  delivered  to  West- 
all,  who  suj^posed  it  had  been  paid  for.  The  plaintiff  now  sues 
Westall  for  the  purchase  price. 

Held,  that  an  agent  authorized  to  buy  for  cash  may  purchase 
on  credit  only  when  there  is  a  custom  to  that  effect,  or  ratification. 

Walker,  J. 

An  agent  was  given  authority  to  purcliase  personal  property  for 
his  principal,  but  only  so  far  as  he  had  cash  of  his  principal  with 
which  he  was  to  pay  for  it.  The  agent  purchased  on  the  credit  of 
the  principal  without  paying  any  money,  and  the  property  was 
delivered  to  the  principal,  who  received  and  converted  it  to  his  own 
use.    'J'iic  court  held  that  wlun  the  agent  violated  his  express  instruc- 


AGENCY  457 

tions  and  bought  on  credit  instead  of  for  cash,  the  principal  had 
the  right  to  repudiate  the  contract  and  to  refuse  to  receive  the  articles, 
but  having  received  and  used  them  with  knowledge  that  they  had 
been  purchased  for  him  and  upon  his  credit,  the  vendor  could  recover 
from  him  the  price  of  the  goods.  It  was  said  that  the  same  result 
would  follow  whether  the  agent  acted  contrary  to  his  authority, 
exceeded  it,  or  had  none  at  all,  it  being  the  simple  case  of  the  goods 
of  one  man  coming  to  the  use  of  another,  which  he  knows  are  not 
intended  as  a  gift,  but  are  sent  to  him  upon  the  expectation  that  he 
will  receive  and  pay  for  them.  A  mere  agency  to  purchase  does  not 
always  and  necessarily  imply  authority  to  pledge  the  credit  of  the 
principal,  and  when  the  agent  is  furnished  with  funds  for  the  purpose 
of  making  purchases  on  his  principal's  account,  he  cannot  bind  the 
latter  by  a  purchase  on  credit,  unless  perhaps,  such  is  the  well  known 
custom  of  trade,  or  unless  the  principal,  with  notice  of  the  facts, 
ratifies  the  transaction.  When  the  authority  to  buy  or  sell  is  given 
in  general  terms,  it  is  clear,  in  the  absence  of  any  restriction  to  the 
contrary,  that  the  agent  has  the  power  to  buy  for  cash  or  on  credit 
as  he  may  deem  best,  and  to  sell  in  the  same  way.  It  may  be  taken 
then  as  a  settled  principle  in  the  law  of  agency  that  if  express 
authority  to  buy  on  a  credit  is  not  given  to  an  agent,  but  he  is 
authorized  to  make  the  purchase,  and  no  funds  are  advanced  to  him 
to  enable  him  to  buy  for  cash,  he  is,  by  implication,  clearly  authorized 
to  purchase  on  the  credit  of  his  principal,  because,  when  an  agent  is 
authorized  to  do  an  act  for  his  principal,  all  the  means  necessary 
for  the  accomplishment  of  the  act  are  impliedly  included  in  the 
authority,  unless  the  agent  be  in  some  particular  expressly  restricted. 
An  agent  to  purchase  property  must,  in  order  to  bind  his  principal, 
who  furnishes  in  advance  the  funds  to  make  the  purchase,  buy  for 
cash,  unless  he  has  express  power  to  buy  upon  credit  or  unless  the 
custom  of  the  trade  is  to  buy  upon  credit,  and  in  the  absence  of  such 
express  authority  or  of  such  a  custom,  the  agent  cannot  bind  his 
principal  by  a  purchase,  upon  credit,  of  a  person  who  is  ignorant  of 
his  real  authority,  as  between  himself  and  his  principal,  unless  the 
property  so  bought  is  delivered  to  the  latter  and  he  receives  it  knowing 
that  his  agent  actually  bought  on  credit  or  that  he  had  no  funds  in 
his  hands  at  the  time  with  which  to  buy  the  same. 

8.     General  Agent. 

Lowenstein  v.  Lombard,  Ayres  &  Co.  164  N.  Y.  324. 

Lowenstein  sues  to  recover  the  value  of  merchandise  shipped 
from  New  York  on  a  vessel  belonging  to  the  defendants,  which 
was  lost  at  sea.  Middleton,  the  defendant's  agent  at  Mobile, 
agreed  to  insure  the  merchandise  shipped  without  requiring  a 
declaration  of  the  value  of  the  goods  before  the  sailing  of  the 
vessel.  He  had  authority  to  insure  goods,  but  only  upon  such 
declaration. 


45 8  COMMERCIAL   LAW    CASES 

Held,  that  the  authority  of  a  general  agent  extends  to  the  exe- 
cution of  contracts  usually  made  by  such  agents. 

Cullen,  J. 

Middleton  was  not  the  universal  agent  or  alter  ego  of  the  de- 
fendant, but  as  to  the  business  confided  to  him  he  was  a  general  agent. 
The  circulars  and  notices  directed  persons  interested  to  "for  rates 
of  freight  or  passage  apply  to  R.  Middleton,  agent,  Mobile ;  W.  J.  Best, 
Agent,  No.  12  Broadway,  New  York."  The  general  rule  is,  "where 
an  entire  business  is  placed  under  the  management  of  an  agent,  the 
authority  of  the  agent  may  be  presumed  to  be  commensurate  with  the 
necessities  of  the  situation."  The  powers  of  the  agent  are,  prima 
facie,  coextensive  with  the  business  entrusted  to  his  care,  and  will 
not  be  narrowed  by  limitations  not  communicated  to  the  person  with 
whom  he  deals.  The  evidence  shows  that  the  other  transportation 
lines  doing  business  between  Mobile  and  New  York  gave  free  insur- 
ance without  requiring  declaration  of  value  to  shippers  of  freight  over 
those  lines,  and  had  done  so  for  a  long  period.  Where  the  principal 
confers  upon  his  agent  an  authority  of  a  kind,  or  empowers  him 
to  transact  business  of  a  nature,  in  reference  to  which  there  is  a 
well  defined  and  publicly  known  usage,  it  is  the  presumption  of  law, 
in  the  absence  of  anything  to  indicate  a  contrary  intent,  that  the 
authority  was  conferred  in  contemplation  of  the  usage,  and  third 
persons,  therefore,  who  deal  with  the  agent  in  good  faith,  and  in 
the  exercise  of  reasonable  prudence,  will  be  protected  against  limita- 
tions upon  the  usual  authority,  of  which  they  had  no  notice.  The 
authority  of  an  agent  may  be  implied  in  many  cases  from  his  official 
designation,  the  position  in  which  he  is  placed,  and  the  duties  which 
naturally  appertain  thereto.  Parties  may  deal  with  the  agents  of 
corporations  upon  the  presumption  that  they  possess  the  powers 
usually  assigned  to  the  office  they  hold,  and  the  principal  is  bound 
as  to  third  persons  acting  in  good  faith  by  the  act  of  an  agent  within 
his  apparent  authority,  although  in  the  particular  instance  it  was 
unauthorized.  We  think,  therefore,  that  Middleton  had  the  apparent 
power  to  make  the  agreement  sued  upon  unless  the  plaintiff  had  notice 
of  limitation  placed  on  that  authority  by  the  principal. 

9.     Superintendent. 

The  Jackson  Paper  Manufacturing  Co.  v.   The  Commercial 
National  Jyank.    ipp  III.  151. 

The  Jackson  Company  brings  this  action  against  the  bank  to 
recover  its  loss  upon  a  check  payable  to  the  plaintiff's  order.  The 
check  was  cashed  by  the  bank  upon  the  indorsement  of  the  plain- 
tiff's name  by  its  superintendent,  who  took  the  money  and 
absconded  with  it. 

Held,  that  a  superintendent  has  no  authority  to  indorse  checks. 


AGENCY  459 

Magruder,  C.  J.: 

Jackson  had  no  express  authority  from  the  appellant  to  indorse 
checks  in  its  name.  Indeed,  it  is  not  contended  by  the  appellee  that 
Jackson  had  any  express  authority  to  make  any  such  indorsements, 
but  it  is  claimed  that  he  had  implied  authority  so  to  do.  The  appellee 
contends  that  his  authority  to  make  the  indorsement  is  to  be  implied 
from  the  nature  of  his  duties  as  appellant's  superintendent  and 
manager,  and  from  his  conduct  in  connection  with  the  business  of 
appellant. 

The  weight  of  authority  seems  to  be  in  favor  of  the  contention 
of  appellant,  that  authority  to  indorse  commercial  paper  can  only  be 
implied  where  the  agent  is  unable  to  perform  the  duties  of  his  agency 
without  the  exercise  of  such  authority.  In  other  words,  the  power  of 
an  agent  to  indorse  commercial  paper  for  his  principal  must  be  a 
necessary  implication  from  an  express  authority  conferred  upon  such 
agent.  Wherever  such  power  is  implied  from  the  acts  of  the  agent, 
the  acts,  subject  to  such  implication,  must  be  acts  of  a  kind  like  those 
from  which  the  implication  is  drawn. 

"An  agent's  acts  in  making  or  transferring  negotiable  paper 
(especially  if  by  indorsement)  are  much  restrained.  It  seems  that 
they  can  be  authorized  only  by  express  and  direct  authority,  or  by 
some  express  power  which  necessarily  implies  these  acts,  because 
the  power  cannot  be  executed  without  them." 

The  power  of  an  agent  to  bind  the  principal  by  the  making  or 
indorsing  of  negotiable  paper  can  only  be  charged  against  the  prin- 
cipal by  necessary  implication,  where  the  duties  to  be  performed 
cannot  be  discharged  without  the  exercise  of  such  a  power,  or  where 
the  power  is  a  manifestly  necessary  and  customary  incident  of  the 
character  bestowed  upon  the  agent,  and  where  the  power  is  prac- 
tically indispensable  to  accomplish  the  object  in  view.  An  agent 
cannot  bind  his  principal  by  making  or  indorsing  notes  for  his  own 
benefit,  or  the  benefit  of  third  persons. 

It  is  true  that  Jackson  was  the  superintendent  of  appellant's 
mill,  and  managed  the  business  of  running  the  mill;  but,  an  agent 
having  general  authority  to  manage  his  principal's  business  has,  by 
virtue  of  his  employment,  no  implied  authority  to  bind  his  principal 
by  making,  accepting  or  indorsing  negotiable  paper.  Such  an  author- 
ity must  be  expressly  conferred,  or  be  necessarily  implied  from  the 
peculiar  circumstances  of  each  case.  It  may  undoubtedly  be  conferred, 
and  by  implication,  but  it  will  not  be  presumed  from  the  mere 
appointment  as  general  agent. 

While  it  is  well  settled  that  an  authority  to  draw,  accept  or 
indorse  bills  may  be  presumed  from  acts  of  recognition  in  former 
instances,  yet  those  acts  must  be  known  to  the  party  setting  them  up. 


460  COMMERCIAL   LAW    CASES 

10.     Doctrine  of  Estoppel  Not  Applicable  to  Public  Agents. 

Whiteside  v.  United  States,  pj  U .  S.  2^1. 

The  Secretary  of  the  Treasury  appointed  special  agents  to 
receive  and  collect  abandoned  or  captured  property  in  the  southern 
states  during  and  following  the  Civil  War,  with  one  of  whom 
Whiteside  contracted  that  he  should  be  paid  one  half  of  the  value 
of  property  he  might  recover,  and  be  reimbursed  for  expenses 
incurred  in  collecting  such  cotton  as  might  subsequently  be  re- 
leased by  the  government.  The  special  agent  had  no  authority  to 
contract  for  greater  compensation  than  one  quarter  of  the  amount 
actually  retained,  inclusive  of  all  expenses.  Whiteside  recovered 
an  amount  of  cotton  which  was  subsequently  returned  to  the 
owner  by  the  military  officer  of  the  district.  Whiteside  contends 
that  he  is  entitled  to  his  expenses,  as  the  act  of  the  military  officer 
prevented  his  securing  the  entire  amount  to  which  he  would  other- 
wise be  entitled,  basing  his  claim  upon  the  ostensible  authority  of 
the  special  agent  of  the  Treasury  Department  to  make  the  contract 
with  him. 

Held,  that  the  public  is  not  bound  by  the  rules  relating  to  the 
ostensible  authority  of  agents. 

Clifford,  J. 

Different  rules  prevail  in  respect  to  the  acts  and  declarations  of 
public  agents  from  those  which  ordinarily  govern  in  the  case  of  mere 
private  agents.  Principals,  in  the  latter  category,  are  in  many  cases 
bound  by  the  acts  and  declarations  of  their  agents,  even  where  the 
act  or  declaration  was  done  or  made  without  any  authority,  if  it 
appear  that  the  act  was  done  or  declaration  was  made  by  the  agent 
in  the  course  of  his  regular  employment;  but  the  government  or 
public  authority  is  not  bound  in  such  a  case,  unless  it  manifestly 
appears  that  the  agent  was  acting  within  the  scope  of  his  authority, 
or  was  employed  in  his  capacity  as  a  public  agent  to  do  the  act  or  make 
the  declaration  for  the  government. 

Although  a  private  agent,  acting  in  violation  of  specific  instruc- 
tions, yet  within  the  scope  of  his  general  authority,  may  bind  his 
principal,  the  rule  as  to  the  effect  of  the  like  act  of  a  public  agent  is 
otherwise,  for  tlie  reason  that  it  is  better  that  an  individual  should 
occasionally  suffer  from  the  mistakes  of  public  officers  or  agents, 
than  to  adopt  a  rule  which,  through  improper  combinations  or 
collusion,  might  be  turned  to  the  detriment  and  injury  of  the 
public. 

Individuals  as  well  as  courts  must  take  notice  of  the  extent  of 
authority  conferred  by  law  upon  a  person  acting  in  an  ofiicial  capacity, 
and  the  rule  applies  in  such  a  case  that  ignorance  of  the  law  furnishes 
no  excuse  for  any  mistake  or  wrongful  act. 


AGENCY  4.61 

C.    Liability  for  Torts  of  Servant  or  Agent, 

I.    In  General. 

Barwick  v.  English  Joint  Stock  Bank.  L.  R.  2  Ex,  Cos.  (Eng.) 
259- 

Barwick  supplied  Davis  &  Sons  with  oats  on  credit,  upon  a 
guaranty  given  by  the  manager  of  the  defendant  bank  that  checks 
drawn  by  Davis  to  the  plaintiffs  in  payment  of  the  oats  would  on 
receipt  of  money  by  the  bank  for  Davis  have  priority  over  any 
other  payment,  except  to  the  bank.  The  manager  of  the  bank 
fraudulently  concealed  the  fact  that  Davis  and  Sons  owed  the 
bank  £12,000.  When  money  was  paid  to  the  bank  for  the  account 
of  Davis  &  Sons,  it  applied  the  entire  amount  to  its  own  debt. 
Barwick  sues  upon  the  guaranty,  claiming  that  on  account  of  the 
fraudulent  concealment  by  the  agent  of  the  bank,  he  is  entitled 
to  the  sum  received. 

Held,  that  a  principal  is  liable  for  an  unauthorized  fraud  com- 
mitted within  the  scope  of  the  authority  of  the  agent. 

WiUes,  J. 

With  respect  to  the  question,  whether  a  principal  is  answerable 
for  the  act  of  his  agent  in  the  course  of  his  master's  business,  and 
for  his  master's  benefit,  no  sensible  distinction  can  be  drawn  between 
the  case  of  fraud  and  the  case  of  any  other  wrong.  The  general  rule 
is,  that  the  master  is  answerable  for  every  such  wrong  of  the  servant 
or  agent  as  is  committed  in  the  course  of  the  service  and  for  the 
master's  benefit,  though  no  express  command  or  privity  of  the  master 
be  proved.  That  principle  is  acted  upon  every  day  in  running  down 
cases.  It  has  been  applied  also  to  direct  trespass  to  goods,  as  in  the 
case  of  holding  the  owners  of  ships  liable  for  the  act  of  masters 
abroad  improperly  selling  the  cargo.  It  has  been  held  applicable  to 
actions  of  false  imprisonment  in  cases  where  officers  of  railway 
companies,  entrusted  with  the  execution  of  by-laws  relating  to  im- 
prisonment, and  intending  to  act  in  the  course  of  their  duty,  improperly 
imprison  persons  who  are  supposed  to  come  within  the  terms  of  the 
by-laws.  It  has  been  acted  upon  where  persons  employed  by  the 
owners  of  boats  to  navigate  them  and  to  take  fares,  have  committed 
an  infringement  of  a  ferry,  or  such  like  wrong.  In  all  these  cases 
it  may  be  said,  as  it  was  said  here,  that  the  master  has  not  authorized 
the  act.  It  is  true,  he  has  not  authorized  the  particular  act,  but  he 
has  put  the  agent  in  his  place  to  do  that  class  of  acts,  and  he  must 
be  answerable  for  the  manner  in  which  the  agent  has  conducted 
himself  in  doing  the  business  which  it  was  the  act  of  his  master 
to  place  him  in. 


462  COMMERCIAL   LAW    CASES 

2.  Fraud  Committed  for  Benefit  of  Agent. 

Lloyd  V.  Grace,  Smith  &  Co.  (1912)  A.  C.  (Eng.)  yi6. 

Mrs.  Lloyd,  a  widow  who  owned  two  cottages  and  a  sum  of 
money  secured  by  mortgage,  being  dissatisfied  with  the  income 
derived  therefrom,  consulted  Sandles,  the  managing  clerk  of  the 
defendant  firm  of  solicitors,  in  reference  to  a  change  of  invest- 
ment. He  fraudulently  procured  the  deeds  from  her  and  caused 
her  to  sign  a  conveyance  to  him  of  the  cottages  and  the  mortgage. 
He  then  disposed  of  the  cottages  for  his  own  benefit.    Mrs.  Lloyd 

les  +he  firm  for  the  fraud  of  Sandles. 
Held,  that  a  principal  is  responsible  for  the  fraud  of  an  agent 

ommitted  for  his  own  benefit. 

Lord  Macnaghten: 

The  only  difference  in  my  opinion  between  the  case  where  the 
principal  receives  the  benefit  of  the  fraud,  and  the  case  where  he 
does  not,  is  that  in  the  latter  case  the  principal  is  liable  for  the 
wrong  done  to  the  person  defrauded  by  his  agent  acting  within  the 
scope  of  his  agency;  in  the  former  case  he  is  liable  on  that  ground 
and  also  on  the  ground  that  by  taking  the  benefit  he  has  adopted 
the  act  of  his  agent;  he  cannot  approbate  and  reprobate. 

3.  Wilful  Torts  of  Servant. 

Howe  V.  Newniarch.  12  Allen  (Mass.)  4p. 

Brown,  engaged  in  the  delivery  of  bread  as  a  servant  of  the 
defendant,  drove  on  the  si.^ewalk  in  front  of  Howe's  premises  in 
violation  of  a  statute,  and  injured  Howe,  who  sues  for  damages. 

Held,  that  a  master  is  responsible  for  torts  wilfully  committed 
by  a  servant. 

Hoar,  J. 

The  instruction  requested  by  the  plaintiff  at  the  trial  that  "if  at 
the  time  of  the  injury  the  defendant's  servant  was  engaged  in  the 
business  of  the  defendant,  and  within  the  scope  of  his  duty  as  such 
servant,  and  he  drove  the  horse  over  the  plaintiff  and  did  him  an 
injury,  the  defendant  is  responsible,  whether  the  act  was  done  wilfully 
or  negligently,  the  plaintiff  being  in  the  exercise  of  due  care  himself," 
seems  to  have  been  stated  with  substantial  accuracy.  It  makes  the 
test  of  the  defendant's  liability,  not  the  intention  of  the  servant,  but 
the  fact  that  the  injurious  act  was  done  while  engaged  in  his  master's 
business  and  within  the  scope  of  his  duty  as  a  servant.  If  the  act 
of  driving  over  the  plaintiff  was  done  wilfully,  still  it  may  also  have 


AGENCY  463 

been  done  negligently  in  the  view  of  the  law ;  that  is,  in  disregard 
of  the  plaintiff's  rights,  and  neglect  and  omission  of  the  precautions 
necessary  to  his  safety.  It  is  obvious  that  the  test  of  the  master's 
liability  cannot  be  whether  the  servant  is  a  trespasser;  whether  his 
violence  be  accidental  or  intentional,  if  it  is  without  lawful  justifi- 
cation. But  if  the  servant  is  strictly  within  the  scope  of  his  employ- 
ment, doing  his  master's  work,  and,  for  the  purpose  of  doing  what 
he  is  employed  to  do,  does  it  in  a  manner  which  violates  the  rights  of 
another,  it  is  difficult  to  see  why  the  master  should  be  exempted 
from  responsibility,  because  the  servant  knows  that  his  act  will  be 
injurious,  and  intends  to  do  it.  If  the  consent  of  the  master  is  made 
the  ground  of  his  liability,  the  master  is  no  more  consenting  to  the 
thoughtless  negligence  of  his  servant  than  to  his  wilful  negligence. 
The  authorities  all  agree  that,  where  an  action  is  brought  against 
the  master  for  an  injury  occasioned  by  the  servant's  negligence  in 
his  service,  it  is  no  defense  to  show  that  the  master  directed  the 
servant  to  be  careful;  or  even  that  he  cautioned  him  against  the 
particular  act  of  negligence  which  produced  the  injury. 

The  act  which  causes  the  injury  may  be  precisely  the  same, 
whether  merely  careless  or  intentional,  and  the  authority  of  the 
master  wanting  as  much  in  one  case  as  in  the  other. 

The  rule  may  be  stated  thus :  The  master  is  not  responsible  as  a 
trespasser,  unless  by  direct  or  implied  authority  to  the  servant  he 
consents  to  the  wrongful  act.  But  if  the  master  gives  an  order  to  a 
servant  which  implies  the  use  of  force  and  violence  to  others,  leaving 
to  the  discretion  of  the  servant  to  decide  when  the  occasion  arises 
to  which  the  order  applies  and  the  extent  and  kind  of  force  to  be 
used,  he  is  liable,  if  the  servant  in  executing  the  order  makes  use 
of  force  in  a  manner  or  to  a  degree  which  is  unjustifiable.  And  in 
an  action  of  tort  in  the  nature  of  an  action  on  the  case,  the  master 
is  not  responsible  if  the  wrong  done  by  the  servant  is  done  without 
his  authority,  and  not  for  the  purpose  of  executing  his  orders,  or 
doing  his  work.  So  that  if  the  servant,  wholly  for  a  purpose  of  his 
own,  disregarding  the  object  for  which  he  is  employed,  and  not  in- 
tending by  his  act  to  execute  it,  does  an  injury  to  another  not  within 
the  scope  of  his  employment,  the  master  is  not  liable.  But  if  the  act 
be  done  in  the  execution  of  the  authority  given  him  by  his  master, 
and  for  the  purpose  of  performing  what  the  master  has  directed,  the 
master  will  be  responsible,  whether  the  wrong  done  be  occasioned  by 
negligence,  or  by  a  wanton  or  reckless  purpose  to  accomplish  the 
master's  business  in  an  unlawful  manner. 

4.    Servants  for  Whose  Acts  Master  is  Responsible. 

Haluptzok  V.  Great  Northern  Railway  Co.  ^^  Minn.  446. 

Haluptzok,  who  was  properly  on  the  premises  of  the  defendant 
railway  company,  was  injured  by  the  negligent  handling  by 
O'Connell  of  a  truck  belonging  to  the  defendant.     O'Connell  was 


464  COMMERCIAL   LAW    CASES 

allowed  by  the  station  agent  to  learn  telegraphy  in  the  station,  and 
in  return  helped  with  the  work  without  compensation.  The  rail- 
road did  not  authorize  the  employment,  but  another  man  had 
been  employed  in  the  same  way  previous  to  the  accident. 

Heild,  that  although  a  master  is  not  liable  for  the  acts  of  a 
servant  not  employed  with  his  consent,  such  consent  may  be  either 
express  or  implied. 

Mitchell,  J. 

Under  the  doctrine  of  respondeat  superior,  a  master,  however 
careful  in  the  selection  of  his  servants,  is  responsible  to  strangers 
for  their  negligence  committed  in  the  course  of  their  employment. 
The  doctrine  is  at  best  somewhat  severe,  and,  if  a  man  is  to  be  held 
liable  for  the  acts  of  his  servants,  he  certainly  should  have  the 
exclusive  right  to  determine  who  they  shall  be.  Hence,  we  think, 
in  every  well-considered  case  where  a  person  has  been  held  liable, 
under  the  doctrine  referred  to,  for  the  negligence  of  another,  that 
other  was  engaged  in  his  service  either  by  the  defendant  personally, 
or  by  others  by  his  authority,  express  or  implied.  There  is  a  class 
of  cases  which  seem  to  hold  that  a  person  may  be  liable  for  the 
negligence  of  another,  not  his  servant.  But  these  were  generally 
cases  where  the  injury  was  done  by  a  contractor,  subcontractor,  or 
their  servants,  upon  the  real  estate  of  the  defendant,  of  which  he 
was  in  possession  and  control;  and  they  seem  to  proceed  upon  the 
theory  that,  where  a  man  is  in  possession  of  fixed  property,  he  must 
take  care  that  it  is  so  used  and  managed  by  those  whom  he  brings 
upon  the  premises  as  not  to  be  dangerous  to  others.  In  that  view, 
he  is  held  liable,  not  for  the  negligence  of  another,  but  for  his  own 
personal  negligence  in  not  preventing  or  abating  a  nuisance  on  his 
own  premises.  There  will  also  be  found  statements  to  the  effect 
that  where  a  servant  is  employed  to  do  a  particular  piece  of  work, 
and  he  employs  another  person  to  assist  him,  the  master  is  liable  for 
the  acts  of  the  person  so  employed  as  much  as  for  the  servant  himself. 
Thus  generally  stated,  without  qualification,  the  proposition  is  mis- 
leading, as  well  as  inaccurate. 

A  master,  as  such,  can  be  held  liable  for  the  negligence  only  of 
those  who  are  employed  in  his  work  by  his  authority,  and  hence,  if 
a  servant  who  is  employed  to  perform  a  certain  work  procures  another 
person  to  assist  him,  the  master  is  liable  for  the  sole  negligence 
of  the  latter  only  when  the  servant  had  authority  to  employ  such 
assistant.  Such  authority  may,  however,  be  implied  as  well  as  ex- 
press, and  subsequent  ratification  is  equivalent  to  original  authority; 
and,  where  the  servant  has  authority  to  employ  assistants,  such  as- 
sistants, of  course,  become  the  immediate  servants  of  the  master,  the 
same  as  if  employed  by  him  personally.  Such  authority  may  be 
implied  from  the  nature  of  the  work  to  be  performed,  and  also  from 
the  general  course  of  conducting  the  business  of  the  master  by  the 
servant  for  so  long  a  time  tliat  knowledge  and  consent  on  the  part  of 


AGENCY  465 

the  master  may  be  inferred.  It  is  not  necessary  that  a  formal  or 
express  employment  on  behalf  of  the  master  should  exist,  or  that  com- 
pensation should  be  paid  by  or  expected  from  him.  It  is  enough  to 
render  the  master  liable  if  the  person  causing  the  injury  was  in  fact 
rendering  service  for  him  by  his  consent,  express  or  implied. 

5.     Deviation. 

McCarthy  v.  Timmins.   178  Mass.  j/8. 

Scott,  the  driver  of  a  team  belonging  to  Timmins,  negligently 
struck  and  injured  McCarthy.  Scott  had  been  ordered  to  take  the 
team  to  the  stable,  but  instead  of  doing  so,  he  v^as  driving  to  a 
saloon  for  purposes  of  his  ow^n  at  the  time  the  accident  occurred. 
The  defense  is  that  Scott  v^^as  not  acting  in  the  course  of  his  em- 
ployment when  the  accident  occurred. 

Held,  that  a  master  is  not  liable  for  torts  of  his  servant  done 
when  the  servant  has  deviated  from  his  employment. 

Hammond,  J. 

The  well  established  rule  as  to  the  extent  of  the  liability  of 
the  master  for  the  act  of  his  servant,  so  far  as  material  cO  this  case, 
is  that  if  the  act  is  done  without  the  authority  of  the  master  and  not 
for  the  purpose  of  executing  his  orders  or  doing  his  work,  then  he 
is  not  responsible,  but  if  it  is  done  in  the  execution  of  the  authority 
given  by  the  master  and  for  the  purpose  of  performing  what  he 
has  directed,  then  he  is  responsible,  whether  the  act  be  negligent  or 
wilful. 

The  only  trouble  is  in  the  application  of  the  rule,  and  it  is  not 
easy  to  reconcile  the  cases.  Scott  had  been  employed  to  drive  the 
team  in  the  carriage  of  passengers,  and  that  work  was  ended  for  the 
day.  He  was  then  directed  to  go  to  the  stables,  and  there  can  be  no 
doubt  that  so  long  as  he  drove  the  team  with  that  end  in  view,  and 
for  that  purpose  and  for  no  purpose  of  his  own,  he  was  engaged  in 
his  master's  business,  even  if  he  made  a  detour  contrary  to  the  direc- 
tion of  his  master.  We  are  not  disposed  to  lay  much  stress  on  the 
fact  that  he  went  down  Boylston  Street  rather  than  Commonwealth 
Avenue,  but  when  he  reached  Massachusetts  Avenue,  it  is  plain 
that  his  only  purpose  in  turning  southward  instead  of  northward, 
and  going  seven  hundred  and  fifty  eight  feet  to  Dundee  Street,  was 
not  only  to  deviate  from  the  regular  way  of  reaching  the  stable 
but  was  for  a  purpose  of  his  own,  namely,  to  get  a  drink.  He 
was  upon  no  errand  of  his  master,  and  this  journey  was  not  for  the 
purpose  of  getting  to  the  stables  even  by  a  circuitous  route.  He 
was  doing  an  act  wholly  for  a  purpose  of  his  own,  disregarding  the 
object  for  which  he  was  employed  and  not  intending  by  his  act  to 
execute  it,  and  not  within  the  scope  of  his  employment.  In  such 
case  the  defendant  should  not  be  held  answerable. 


466  COMMERCIAL   LAW    CASES 

6.     Servant  Loaned  to  Another. 

Driscoll  V.  Towle.  181  Mass.  416. 

DriscoU  was  injured  by  the  neghgent  driving  of  Keenan,  who 
was  in  the  employ  of  the  defendant,  Towle.  Towle  was  engaged 
in  the  general  teaming  business  and  had  contracted  with  the  Boston 
Electric  Light  Company  for  the  entire  use  of  his  team.  At  the 
time  of  the  accident,  Keenan  was  working  under  instructions  of 
the  Electric  Light  Company.  Towle  defends  the  action  on  the 
ground  that  as  Keenan  was  at  that  time  not  in  his  service,  but  in 
that  of  the  Electric  Light  Company,  he  is  not  liable  for  the 
negligence  of  Keenan. 

Held,  that  while  a  servant  may  be  loaned  to  another  in  such  a 
way  as  to  exempt  the  master  from  liability  for  his  acts,  the  facts 
of  this  case  do  not  present  that  situation. 

Holmes,  C.  J. 

It  is  true,  of  course,  that  a  person  admitted  to  be  in  the  general 
employment  of  one  may  be  lent  to  another,  (with  his  own  consent), 
in  such  a  way  as  to  become  the  servant  of  that  other  for  the  occa- 
sion or  for  the  time.  Many  cases  have  been  decided  on  this  ground. 
They  generally  depend  upon  the  nature  of  the  contract  or  arrange- 
ment, express  or  implied,  between  the  general  master  and  third  person. 
But  the  mere  fact  that  a  servant  is  sent  to  do  work  pointed  out  to 
him  by  a  person  who  has  made  a  bargain  with  his  master  does  not 
make  him  that  person's  servant.  More  than  that  is  necessary  to 
take  him  out  of  the  relation  established  by  the  only  contract  which 
he  has  made  and  to  make  him  a  voluntary  subject  of  a  new  sovereign, 
— as  the  master  sometimes  was  called  in  the  old  books. 

The  person  who  receives  orders  (from  the  party  who  has  made 
a  bargain  with  his  master),  is  not  subject  to  the  general  orders  of 
the  party  who  gives  them.  He  does  his  own  business  in  his  own 
way,  and  the  orders  which  he  receives  simply  point  out  to  him  the 
work  which  he  or  his  master  had  undertaken  to  do.  There  is  not 
that  degree  of  intimacy  and  generality  in  the  subjection  of  one  to 
the  other  which  is  necessary  in  order  to  identify  the  two  and  to 
make  the  employer  liable  under  the  fiction  that  the  act  of  the  em- 
ployed is  his  act. 

In  cases  like  the  present,  there  is  a  general  consensus  of  au- 
thority that,  although  a  driver  may  be  ordered  by  those  who  have 
dealt  with  his  master  to  go  to  this  place  or  that,  to  take  this  or  that 
burden,  to  hurry  or  to  take  his  time,  nevertheless  in  respect  of  the 
manner  of  his  driving  and  the  control  of  his  horse  he  remains  sub- 
ject to  no  orders  but  those  of  the  man  who  pays  him.  Therefore  he 
can  make  no  one  else  liable  if  he  negligently  runs  a  person  down  in 
the  street. 


AGENCY  467 

7.  Liability  for  Act  of  Compulsory  Employee. 

Homer    Ramsdcll    Transportation    Co.    v.    La    Compagnie 
Gcnerale  Transatlantique.  182  U.  S.  406. 

The  Transportation  Company  sues  for  damages  to  its  wharf 
caused  by  one  of  the  defendant's  ships.  The  defendant  con- 
tends that  the  accident  was  occasioned  by  the  negHgence  of  the 
pilot,  whom  the  company  was  required  by  law  to  employ,  and 
over  whose  actions  it  had  no  control. 

Held,  that  a  master  is  not  liable  for  torts  of  a  servant  over 
whose  acts  he  has  no  control. 

Gray,  J. 

The  liability  of  the  owner  at  common  law  for  the  act  of  a  pilot 
on  his  vessel  is  well  stated  by  Mr.  Justice  Story;  "The  master  of 
a  ship,  and  the  owner  also,  is  liable  for  any  injury  done  by  the 
negligence  of  the  crew  employed  in  the  ship.  The  same  doctrine 
will  apply  to  the  case  of  a  pilot,  employed  by  the  master  or  owner, 
by  whose  negligence  any  injury  happens  to  a  third  person  or  his 
property;  as,  for  example,  by  a  collision  with  another  ship,  occa- 
sioned by  his  negligence.  And  it  will  make  no  difference  in  the  case, 
that  the  pilot,  if  any  is  employed,  is  required  to  be  a  licensed  pilot ; 
provided  the  master  is  at  liberty  to  take  a  pilot,  or  not,  at  his  pleasure ; 
for,  in  such  a  case,  the  master  acts  voluntarily,  although  he  is  neces- 
sarily required  to  select  from  a  particular  class.  On  the  other  hand, 
if  it  is  compulsive  upon  the  master  to  take  a  pilot,  and,  if  he  is 
bound  to  do  so  under  a  penalty,  then,  and  in  such  a  case,  neither  he, 
nor  the  owner,  will  be  liable  for  injuries  occasioned  by  the  negligence 
of  a  pilot;  for,  in  such  a  case,  the  pilot  cannot  be  deemed  properly 
the  servant  of  the  master  or  the  owner,  but  is  forced  upon  them,  and 
the  maxim,  Qui  facit  per  aliunt  facit  per  se,  does  not  apply." 

The  answer  to  the  question  must  therefore  be  that  in  an  action 
at  common  law  the  shipowner  is  not  liable  for  injuries  inflicted  ex- 
clusively by  negligence  of  a  pilot  accepted  by  a  vessel  compulsorily. 

8.  Independent  Contractor. 

Boomer  v.  Wilbur.  I/6  Mass.  482. 

The  plaintiff  sues  for  personal  injuries  occasioned  by  the  falling 
of  brick  and  mortar  from  a  building  belonging  to  Wilbur,  while 
he  was  passing  on  the  sidewalk.  The  brick  and  mortar  fell  owing 
to  the  negligence  of  a  contractor  who  was  repairing  the  chimney 
under  a  contract  to  do  so  for  a  fixed  sum. 

Held,  that  a  master  is  not  liable  for  torts  of  an  independent 
contractor  engaged  upon  his  business. 


468  COMMERCIAL  LAW    CASES 

Hammond,  J. 

While  the  master  is  liable  for  the  negligence  of  the  servant, 
yet  when  the  person  employed  is  engaged  under  an  entire  contract 
for  a  gross  sum  in  an  independent  operation,  and  is  not  subject 
to  the  direction  and  control  of  his  employer,  the  relation  is  not  re- 
garded as  that  of  master  and  servant,  but  as  that  of  contractor  and 
contractee ;  and  in  such  case  the  general  rule  is  that  the  negligence  of 
the  contracting  party  cannot  be  charged  upon  him  for  whom  the  work 
is  to  be  done ;  and  this  rule  is  applicable  even  where  the  owner  of  the 
land  is  the  person  who  hires  the  contractor,  and  for  whose  benefit 
the  work  is  done.  There  are,  however,  some  well  known  exceptions 
to  the  rule.  If  the  performance  of  the  work  will  necessarily  bring 
wrongful  consequences  to  pass  unless  guarded  against,  and  if  the 
contract  cannot  be  performed  except  under  the  right  of  the  employer, 
who  retains  the  right  of  access,  the  law  may  hold  the  employer  answer- 
able for  negligence  in  the  performance  of  the  work. 

This  is  not  a  case  where  the  work,  even  if  properly  done,  creates 
a  peril  unless  guarded  against.  The  accident  was  caused  by  the  act 
of  the  contractor  in  doing  what  it  was  not  necessary  for  him  to  do, 
what  he  was  not  expected  to  do,  and  what  he  did  not  intend  to  do. 
The  work  could  not  be  classed  as  work  which,  if  properly  done,  was 
ordinarily  attended  with  danger  to  the  public. 

The  negligence,  if  any,  was  in  a  mere  detail  of  the  work.  The 
contract  did  not  contemplate  such  negligence,  and  the  negligent  party 
is  the  only  one  to  be  held. 

9.     Torts  of  Public  Servants. 

Welsh  V.  The  Village  of  Rutland.  56  Vt.  228. 

Mrs.  Welsh  was  injured  by  slipping  on  ice  formed  as  a  result 
of  the  negligent  thawing  out  of  a  frozen  hydrant  by  the  fire  depart- 
ment of  the  village.    She  sues  the  village  for  this  negligence. 

Held,  that  a  public  body  is  not  liable  for  the  torts  of  its  agents 
committed  in  the  execution  of  governmental  functions. 

Royce,  C.  J. 

At  common  law  it  has  been  a  settled  principle  ever  since  1788, 
that  an  individual  cannot  sustain  an  action  against  a  political  sub- 
division of  the  state  based  upon  the  misconduct  or  nonfeasance  of 
public  oflficers.  The  reasons  assigned  in  the  earlier  cases  were  that 
the  maxim  which  declares  it  better  for  the  individual  to  suffer  than 
for  the  public  to  be  inconvenienced,  is  stronger  than  the  other  prin- 
ciple, that  for  every  injury  the  law  gives  a  remedy,  and  that  the 
plaintiff  might  levy  his  execution  upon  the  property  of  an  individual 
inhabitant — the  organization  having  no  fund  legally  applicable  to  its 
payment — thus  giving  rise  to  multiplicity  of  actions  to  enforce  con- 


AGENCY  469 

tribution  and  great  public  annoyance.  But  the  more  modern  and 
broader  ground  is  said  to  be,  that  these  quasi  corporations  are  mere 
instrumentalities  for  the  administration  of  public  government  and 
the  collection  and  disbursement  of  public  moneys,  raised  by  taxation 
for  public  uses,  and  which  cannot  lawfully  be  applied  to  the  liquida- 
tion of  damages  caused  by  wrongful  acts  of  their  officers. 

This  rule  of  exemption  extends  necessarily  to  municipal  cor- 
porations so  far  as  the  reason  of  it  applies,  and  that  is  so  far  as  the 
acts  done  are  governmental  and  political  in  their  character  and  solely 
for  the  public  benefit  and  protection;  or  the  negligence  or  non- 
feasance are  in  respect  of  the  same  matters.  Instances  of  this  non- 
liability may  be  found  in  numerous  cases.  The  immunity  goes  a  step 
farther  and  protects  such  corporations  in  a  total  neglect  to  perform 
certain  functions  which  are  concededly  for  the  public  benefit  and 
convenience.  No  action  can  be  maintained  against  a  municipal  cor- 
poration by  an  individual,  no  matter  how  great  an  injury  he  might 
be  able  to  show,  for  the  neglect  to  build  sewers  or  water-works,  or 
for  defects  or  insufficiencies  in  the  plans  adopted  for  these  or  other 
public  improvements ;  and  this  is  upon  the  ground  that  in  such  mat- 
ters the  corporation  is  discharging  a  legislative  or  quasi  judicial 
function,  and  its  action  is  not  reviewable  by  the  law  courts.  If  the 
plan  adopted  for  the  construction  of  such  public  works  is  not  nec- 
essarily injurious  or  dangerous  to  private  interests,  and  is  executed 
with  reasonable  skill  and  prudence,  the  protection  against  liability  is 
absolute.  And  the  same  rule  applies  to  the  action  of  municipal  cor- 
porations in  changing  or  grading  their  streets. 

When,  however,  municipal  corporations  are  not  in  the  exercise 
of  their  purely  governmental  functions  for  the  sake  and  immediate 
benefit  of  the  public,  but  are  exercising  as  corporations  private 
franchise  powers  and  privileges,  or  dealing  with  property  held  by 
them  for  their  corporate  advantage,  gain  or  emolument,  though 
inuring  ultimately  to  the  benefit  of  the  general  public,  then  they 
become  liable  for  negligent  exercise  of  such  powers  precisely  as  are  in- 
dividuals. So,  of  the  construction  and  maintenance  of  water-works; 
of  ditches  or  drains;  of  bridges  or  culverts,  and  in  respect  of  struc- 
tures which  may  obstruct  the  flow  of  natural  water  courses  and  of 
the  pollution  of  them  by  sewage  and  the  like;  and  public  works  and 
improvements  generally. 

The  fire  department  and  its  service  are  of  no  benefit  or  profit 
to  the  village  in  its  corporate  capacity.  They  are  not  a  source  of 
income  or  profit  to  the  village,  but  of  expense,  which  is  paid — not 
out  of  any  special  receipts  or  fund,  nor  defrayed,  even  in  part,  by 
assessment  upon  particular  persons  or  classes  benefited,  as  in  case 
of  sewers  or  water  works — but  from  the  general  fund  raised  by  taxa- 
tion of  all  the  inhabitants.  The  members  or  employees  of  the  de- 
partment are,  while  acting  in  the  line  of  duty  prescribed  by  them, 
not  agents  of  the  corporation  in  the  sense  which  renders  it  liable  for 
their  acts,  but  are  in  the  discharge  of  an  official  duty  as  public 
officers.    To  them  the  doctrine  of  respondeat  superior  does  not  apply. 


470  COMMERCIAL   LAW    CASES 

10.    Torts  of  Agents  of  Charitable  Organization. 

Hearns  v.  The  Waterbury  Hospital.  66  Conn.  p8. 

Hearns  sues  for  damages  arising  from  unskilful  and  negligent 
treatment  while  a  patient  in  the  hospital,  a  charitable  corporation. 

Held,  that  a  charitable  corporation  is  not  usually  responsible  for 
torts  committed  by  its  employees. 

Hamersley,  J. 

All  questions  essential  to  the  disposition  of  the  case  presented 
by  this  appeal  are  settled  by  deciding  upon  the  liability  of  the  de- 
fendant for  the  negligence  of  its  servants;  i.e.,  when  a  corporation 
like  the  defendant  employs  a  servant  who  does  not  represent  it  in 
the  way  that  every  corporation  must  be  represented  by  its  directors 
or  managers,  but  is  simply  employed  for  a  special  work  in  the  same 
manner  as  if  employed  by  an  individual  for  the  same  work — is 
such  corporation  liable  for  an  injury  caused  in  the  course  of  his 
employment  by  such  servant,  and  due  solely  to  his  negligent  conduct  ? 

This  question  has  never  been  decided  in  this  state;  it  has, 
however,  arisen  in  other  states  and  in  England;  and  has  been  so 
intermingled  with  the  different  one  of  the  corporate  liability  of 
eleemosynary  corporations  for  their  own  corporate  negligence,  that  the 
review  we  make  of  cases  illustrating  the  treatment  the  subject  has 
received  from  other  courts,  will  necessarily  include  some  cases  bear- 
ing more  directly  on  the  latter  question. 

We  think  the  drift  of  all  the  cases  clearly  indicates  a  general 
conviction  that  an  eleemosynary  corporation  should  not  be  held  liable 
for  an  injury  due  only  to  the  neglect  of  a  servant,  and  not  caused  by 
its  corporate  negligence,  in  the  failure  to  perform  a  duty  imposed  on 
it  by  the  law ;  and  we  are  satisfied  that  this  general  conviction  rests 
on  sound  legal  principles. 

The  law  which  makes  one  responsible  for  his  own  act,  although 
it  may  be  done  thrx)ugh  another,  and  which  is  expressed  by  the  pri- 
mary meaning  of  the  maxim  qui  facit  per  alhnn  facit  se,  is  based  on 
a  principle  of  universal  justice.  The  law  which  makes  one  responsible 
for  an  act  not  his  own,  because  the  actual  wrongdoer  is  his  servant, 
is  based  on  a  rule  of  public  policy. 

The  liability  of  a  charitable  corporation  for  the  defaults  of  its 
servants  must  depend  upon  the  reasons  of  that  rule  of  policy,  and 
their  application  to  such  a  corporation.  The  rule  is  distinguished  as 
the  doctrine  of  respondeat  superior.  The  practical  ground  on  which 
the  rule  is  based  is  simply  tliis:  On  the  whole,  substantial  justice 
is  best  served  by  making  a  master  responsible  for  the  injuries  caused 
by  his  servant  acting  in  his  service,  when  set  to  work  by  him 
to  prosecute  his  private  ends,  with  the  expectation  of  deriving  from 
that  work  private  benefit.  This  has  at  times  proved  a  hard  rule, 
but  it  rests  upon  a  public  policy  too  firmly  settled  to  be  questioned. 


AGENCY  471 

We  are  now  asked  to  apply  this  rule,  for  the  first  time,  to 
a  class  of  masters  distinct  from  all  others,  and  who  do  not  and  can- 
not come  within  the  reason  of  the  rule.  In  other  words,  we  are 
asked  to  extend  the  rule  and  to  declare  a  new  public  policy  and  say : 
On  the  whole,  substantial  justice  is  best  served  by  making  the  owners 
of  a  public  charity,  involving  no  private  profit,  responsible  not 
only  for  their  own  wrongful  negligence,  but  also  for  the  wrongful 
negligence  of  the  servants  they  employ  only  for  a  public  use  and  a 
public  benefit.  We  think  the  law  does  not  justify  such  an  extension 
of  the  rule  of  respondeat  superior.  It  is  perhaps  immaterial  whether 
we  say  the  public  policy  which  supports  the  doctrine  of  respondeat 
superior  does  not  justify  such  extension  of  the  rule;  or  say  that  the 
public  policy  which  encourages  enterprises  for  charitable  purposes 
requires  an  exemption  from  the  operation  of  a  rule  based  on  legal 
fiction,  and  which,  as  applied  to  the  owners  of  such  enterprises,  is 
clearly  opposed  to  substantial  justice.  It  is  enough  that  a  charitable 
corporation  like  the  defendant — whatever  may  be  the  principle  that 
controls  its  liability  for  corporate  neglect  in  the  performance  of 
a  corporate  duty — is  not  liable,  on  grounds  of  public  policy,  for 
injuries  caused  by  personal  wrongful  neglect  in  the  performance  of 
his  duty  by  a  servant  whom  it  has  selected  with  due  care;  but  in 
such  case  the  servant  is  alone  responsible  for  his  own  wrong. 


D.     Liability  of  Agent  to  Third  Party, 

I.     In  General. 

McCarthy  v.  HugJies.  ^6  R.  I.  66. 

McCarthy,  a  constable,  sues  for  fees  earned  in  serving  writs 
for  Hughes,  who  conducted  a  collection  agency.  Hughes  defends 
on  the  ground  that  he  acted  as  agent  for  the  persons  for  whom 
collections  were  made,  and  is  accordingly  not  personally  respon- 
sible. 

Held,  that  although  an  agent  who  discloses  his  principal  is  not 
ordinarily  liable  on  contracts  entered  into  in  accordance  with  his 
authority,  the  rule  does  not  apply  when  credit  is  given  the  agent 
personally. 

Johnson,  C.  J. 

The  defendant  contends  that  the  plaintifif  as  a  constable  in  serv- 
ing said  writs  was  informed  by  the  writs  as  to  who  was  the  prin- 
cipal; that  the  defendant  was  the  agent  of  the  creditor  or  principal 
disclosed  in  each  writ;  that  the  defendant  exonerated  himself  from 
any  liability  by  reason  of  his  having  disclosed  the  name  of  his 
principal  through  its  appearance  upon  the  writ,  especially  since  he 
made  no  express  agreement  to  pay  such  fees. 


472  COMMERCIAL   LAW    CASES 

In  general,  when  a  man  is  known  to  be  acting  and  contracting 
merely  as  the  agent  of  another,  who  is  also  known  as  the  principal, 
his  acts  and  contracts,  if  he  possesses  full  authority  for  the  purpose, 
will  be  deemed  the  acts  and  contracts  of  the  principal  only,  and  will 
involve  no  personal  responsibility  on  the  part  of  the  agent,  unless  the 
other  expressly  or  impliedly  incurred,  or  intended  to  incur,  such 
personal  responsibility. 

Was  Hughes,  however,  merely  the  agent  of  the  various  parties 
for  whom  he  had  undertaken  to  collect  bills,  and  did  he  merely  as 
such  agent  employ  McCarthy?  Can  it  certainly  be  said  that  the 
circumstances  of  the  case  do  not  lead  to  the  conclusion  that  he  has 
either  expressly  or  impliedly  incurred  or  intended  to  incur,  personal 
responsibility?  It  is  undisputed  that  he  advertised  himself  as  a  col- 
lector of  bills,  and  that  he  carried  on  the  business  of  collecting  bills. 

In  our  opinion  a  collection  agency,  in  taking  steps  for  the  col- 
lection of  accounts,  in  the  absence  of  a  special  contract  limiting  its 
liability,  and  no  such  contract  is  here  claimed,  is  an  independent  con- 
tractor, and  is  liable  to  those  whom  it  employs  in  the  business  of 
making  collections.  We  see  no  reason  for  a  distinction  in  this  re- 
spect whether  the  employee  is  an  attorney  or  a  constable. 

2.    For  Torts. 

Lough  V.  John  Davis  &  Co.  jo  Wash.  204. 

The  plaintiff  was  injured  by  reason  of  the  unsafe  condition 
of  a  house  which  it  was  the  duty  of  the  defendant,  as  agent,  to 
rent  and  keep  in  repair.  The  defendant  insists  that  the  failure  to 
repair  represents  merely  the  omission  of  a  duty  to  the  principal, 
and  that  a  third  party  may  not  take  advantage  of  such  an  omission. 

Held,  that  a  paid  agent  is  liable  for  nonfeasance  as  well  as 
misfeasance. 

Dunbar,  J. 

It  is  the  contention  of  the  respondent  that  the  law  is  well  settled 
that  for  a  misfeasance  the  agent  is  personally  liable,  but  that  he  is 
never  liable  for  a  mere  nonfeasance;  and  that,  the  respondent  being 
charged  only  with  a  nonfeasance  or  neglect  to  do  its  duty,  and  not 
with  any  misfeasance  or  act  which  it  ought  not  to  do,  the  complaint 
on  its  face  shows  that  it  is  not  liable,  and  that  the  demurrer  was 
therefore  properly  sustained.  This  rule  is  announced  by  some  of 
the  law  writers  and  many  of  the  courts. 

The  reason  assigned  to  sustain  this  rule  is  that  the  responsibility 
must  arise  from  some  express  or  implied  obligations  between  the 
particular  parties  standing  in  privity  of  law  or  contract  with  each 
other.  If  this  be  true,  it  is  difficult  to  sec  what  difference  there  is  in 
the  obligation  to  their  principal  between  the  commission  of  an  act 
by  the  agents  which  they  are  bound  to  their  principal  not  to  do  and 


AGENCY  473 

the  omission  of  an  act  whfth  they  have  obligated  themselves  to  their 
principal  to  do.  They  certainly  stand  in  privity  of  law  or  contract 
with  their  principal  exactly  as  much  in  the  one  instance  as  in  the 
other,  for  the  obligation  to  do  what  ought  to  be  done  is  no  more 
strongly  implied  in  the  ordinary  contract  of  agency  than  is  the  ob- 
ligation not  to  do  what  ought  not  to  be  done.  This  reason  for  the 
rule  not  being  tenable,  and  no  other  reason  being  obvious,  the  rule 
itself  ought  not  to  obtain;  for  jurisprudence  does  not  concern  itself 
with  such  attenuated  refinements.  It  rests  upon  broad  and  compre- 
hensive principles  in  its  attempt  to  promote  rights  and  redress  wrongs. 
If  it  takes  note  of  a  distinction,  such  distinction  will  be  a  practical 
one,  founded  on  a  difference  in  principle,  and  not  a  distinction 
without  a  difference;  and  there  can  be  no  distinction  in  principle 
between  the  acts  of  a  servant  who  puts  in  motion  an  agency  which, 
in  its  wrongful  operation,  injures  his  neighbor,  and  the  acts  of  a 
servant  who,  when  he  sees  such  agency  in  motion,  and  when  it  is  his 
duty  to  control  it,  negligently  refuses  to  do  his  duty,  and  suffers  it 
to  operate  to  the  damage  of  another.  There  is  certainly  no  difference 
in  moral  responsibility;  there  should  be  none  in  legal  responsibility. 
Of  course,  if  the  omission  of  the  act  or  the  nonfeasance  does  not 
involve  a  nonperformance  of  duty,  then  the  responsibility  would 
not  attach.  If  it  does  involve  a  nonperfortnance  of  duty  to  such 
an  extent  that  the  agent  is  liable  to  the  principal  for  the  damages 
ensuing  from  his  neglect,  there  is  no  hardship  in  compelling  him  to 
respond  directly  to  the  injured  party.  Such  practice  is  less  circuitous 
than  that  which  necessitates  first  the  suing  of  the  master  by  the 
party  injured,  and  then  a  suit  by  the  master  against  the  servant  to 
recoup  the  damages. 

In  Osborne  v.  Morgan,  130  Mass.  102,  an  agent  of  premises  was 
held  responsible  to  a  third  person  for  suffering  to  remain  suspended 
from  a  room  a  tackle  block  which  fell  upon  and  injured  the  plaintiff. 
The  court,  speaking  through  Chief  Justice  Gray,  said : 

"The  principal  reason  assigned  was  that  no  misfeasance  or 
positive  act  of  wrong  was  charged,  and  that  for  nonfeasance,  which 
was  merely  negligence  in  the  performance  of  a  duty  arising  from 
some  express  or  implied  contract  with  his  principal  or  employer, 
an  agent  or  servant  was  responsible  to  him  only,  and  not  to  any 
third  person.  It  is  often  said  in  the  books  that  an  agent  is  respon- 
sible to  third  persons  for  misfeasance  only,  and  not  for  nonfeasance. 
And  it  is  doubtless  true  that  if  an  agent  never  does  anything  towards 
carrying  out  his  contract  with  his  principal,  but  wholly  omits  and 
neglects  to  do  so,  the  principal  is  the  only  person  who  can  maintain 
any  action  against  him  for  the  nonfeasance.  But  if  the  agent  once 
actually  undertakes  and  enters  upon  the  execution  of  a  particular 
work,  it  is  his  duty  to  use  reasonable  care  in  the  manner  of  executing 
it,  so  as  not  to  cause  any  injury  to  third  persons  which  may  be 
the  natural  consequence  of  his  acts;  and  he  cannot,  by  abandoning 
its  execution  midway  and  leaving  things  in  a  dangerous  condition, 
exempt  himself  from  liability  to  any  person  who  suffers  injury  by 


474  COMMERCIAL    LAW    CASES 

reason  of  his  having  so  left  them  without  proper  safeguards.  This 
is  not  nonfeasance,  or  doing  nothing;  but  it  is  misfeasance,  doing 
improperly." 

There  is  still  another  class  of  cases  which  holds  what  seems 
to  us  to  be  the  correct  doctrine,  viz.,  that  the  obligation  whether 
for  misfeasance  or  nonfeasance,  does  not  rest  in  contract  at  all,  but 
is  a  common  law  obligation  devolving  upon  every  responsible  person 
to  so  use  that  which  he  controls  as  not  to  injure  another,  whether  he 
is  in  the  operation  of  his  own  property  as  principal  or  in  the  operation 
of  the  property  of  another  as  agent. 

Where  a  principal  engages  an  agent  to  do  certain  work  and  to 
take  entire  control  over  it,  while  the  principal  does  not  interfere, 
but  leaves  it  entirely  with  the  agent,  the  agent  and  not  the  principal 
will  be  liable  to  third  parties  for  injuries  or  damages  sustained  by 
the  negligence  or  unskilful  manner  in  which  the  work  was  done. 

Where  the  agent  is  at  liberty  to  choose  his  own  mode  of  action, 
then  he  is  distinctively  liable  to  damages,  if  by  such  mode  of  action 
he  invades  another's  rights. 

Our  conclusion  is  that  the  complaint  states  a  cause  of  action 
against  the  respondent. 

3.     Liability  of  Unauthorized  Agent. 

Kroeger  v.  Pitcairn.  loi  Pa.  St.  j//. 

Kroeger  insured  his  merchandise  with  a  company  represented 
by  Pitcairn.  Pitcairn  told  him  that  the  policy  would  not  be 
avoided  by  storing  a  barrel  of  carbon  oil  on  the  premises,  although 
the  policy  expressly  provided  against  the  storage  of  such  mate- 
rial. After  a  loss  occurred,  the  policy  was  in  fact  avoided  on  this 
groimd  and  Kroeger  sues  Pitcairn  upon  his  false  representation. 

Held,  that  an  agent  is  responsible  for  any  unjustified  assump- 
tion of  authority  to  act  for  his  principal. 

Sterrctt,  J. 

If  the  president  or  any  one  duly  authorized  to  represent  the 
company  had  acted  as  defendant  did,  there  could  be  no  doubt  as  to 
its  liability.  Why  should  not  the  defendant  be  personally  responsible, 
in  like  manner,  for  the  consequences,  if  he,  assuming  to  act  for  the 
company,  overstepped  the  boundary  of  his  authority  and  thereby 
misled  the  plaintiff  to  his  injury,  whether  intentionally  or  not?  The 
only  difference  is  that  in  the  latter  the  authority  is  self-assumed 
while  in  the  former  it  is  actual ;  but,  that  cannot  be  urged  as  a 
sufficient  reason  why  plaintiff,  who  is  blameless  in  both  cases,  should 
bear  the  loss  in  one  and  not  in  the  other.  As  a  general  rule,  when- 
ever a  party  undertakes  to  do  any  act  as  the  agent  of  another,  if 
he  does  not  possess  any  authority  from  the  principal  therefor,  or 
if  he  exceeds  that  authority  delegated  to  him,  he  will  be  personally 


AGENCY  475 

liable  to  the  person  with  whom  he  is  dealing  for  or  on  account  of  his 
principal. 

The  cases  in  which  agents  have  been  adjudged  liable  person- 
ally have  sometimes  been  classified  as  follows,  ist,  where  the  agent 
makes  a  false  representation  of  his  authority  with  intent  to  de- 
ceive ;  2nd,  where,  with  knowledge  of  his  want  of  authority,  but 
without  intending  any  fraud,  he  assumes  to  act  as  though  he  were 
fully  authorized;  and  3rd,  where  he  undertakes  to  act  bona  fide 
believing  he  has  authority,  but  in  fact  has  none,  as  in  the  case  of  an 
agent  acting  under  a  forged  power  of  attorney.  As  to  cases  fairly 
brought  within  either  of  the  first  two  classes  there  cannot  be  any 
doubts  as  to  the  personal  liability  of  the  self-constituted  agent;  and 
his  liability  may  be  enforced  either  by  an  action  on  the  case  for 
deceit,  or  by  electing  to  treat  him  as  principal.  While  the  liability 
of  agents,  in  cases  belonging  to  the  third  class,  has  sometimes  been 
doubted,  the  weight  of  authority  appears  to  be  that  they  are  also 
liable.  The  agent  is  held  by  law  to  be  equally  as  responsible  as 
he  is  in  the  two  former  cases,  although  he  is  guilty  of  no  intentional 
fraud  or  moral  turpitude.  This  whole  doctrine  proceeds  upon  a 
plain  principle  of  justice;  for  every  person,  so  acting  for  another, 
by  a  natural  if  not  a  necessary  implication  holds  himself  out  as 
having  competent  authority  to  do  the  act;  and  he  thereby  draws  the 
other  party  into  a  reciprocal  engagement.  If  he  has  no  such  author- 
ity and  acts  bona  fide,  still  he  does  a  wrong  to  the  other  party;  and 
if  that  wrong  produces  injury  to  the  latter,  owing  to  his  confidence 
in  the  truth  of  an  express  or  implied  assertion  of  authority  by  the 
agent,  it  is  perfectly  just  that  he  who  makes  such  an  assertion  should 
be  personally  responsible  for  the  consequences,  rather  than  that  the 
injury  should  be  borne  by  the  other  party  who  has  been  misled  by  it. 

4.     Liability  of  Unauthorized  Public  Agent. 

Newman  v.  Sylvester.  42  hid.  106. 

Newman  did  work  in  grading  Market  Street  in  Indianapolis 
under  a  contract  awarded  him  by  the  city.  It  later  appeared  that 
some  of  the  work  done  was  beyond  the  city  limits,  and  payment  was 
refused.  Newman  sues  the  Mayor  and  City  Council  on  the  theory 
that  in  letting  the  contract  they  acted  as  agents  who  had  exceeded 
their  authority  and  are  hence  personally  liable. 

Held,  that  a  public  agent  who  in  good  faith  exceeds  his  author- 
ity is  not  personally  liable. 

Oshorn,  C.  J. 

It  is  said  that  if  one  undertakes  to  act  as  the  agent  for  another, 
bona  fide,  believing  that  he  has  due  authority,  but  in  fact  has  not 
authority,  and  therefore  acts  under  an  innocent  mistake,  he  is  held 
by  law  to  be  equally  as  reprehensible  as  if  he  knew  he  had  no  author- 
ity.    The  reason  given  is  that  every  person  so  acting  for  another, 


476  COMMERCIAL    LAW    CASES 

by  a  natural,  if  not  a  necessary,  implication,  holds  himself  out  as 
having  competent  authority  to  do  the  act,  and  thereby  draws  the 
other  into  a  reciprocal  engagement;  that  the  signature  of  the  agent 
amounts  to  an  affirmation  that  he  has  authority  to  do  the  particular 
act.  "But  circumstances  may  arise,  in  which  the  agent  would  not, 
or  might  not,  be  held  to  be  personally  liable,  if  he  acted  without 
authority,  if  that  want  of  authority  was  known  to  both  parties,  or 
unknown  to  both  parties."  In  all  the  cases  when  one  acting  as  agent 
without  authority  has  been  held  liable,  it  would  be  found  that  he 
had  been  guilty  of  some  fraud,  had  made  some  statement  which  he 
knew  to  be  false,  or  had  stated  as  true  what  he  did  not  know  to 
be  true,  omitting  at  the  same  time  to  give  such  information  to  the 
other  party  as  would  enable  him,  equally  with  himself,  to  judge  as  to 
the  authority  under  which  he  proposed  to  act. 

One  assuming  to  act  as  agent  for  another  without  authority  does 
not  necessarily  render  himself  liable.  It  is  when  he  knowingly  or 
carelessly  assumes  to  act  without  being  authorized,  or  conceals  the 
true  state  of  his  authority,  and  falsely  leads  the  party  with  whom 
he  thus  contracts  to  repose  in  his  authority,  that  he  may  be  liable. 
If  he  enter  into  the  contract  in  the  name  and  as  the  agent  of  an- 
other, and  does  it  honestly,  fully  disclosing  all  the  facts  touching  the 
authority  under  which  he  acts,  so  that  the  one  contracted  with, 
from  such  information  or  otherwise,  is  fully  informed  of  the  author- 
ity possessed  or  claimed  by  him,  he  is  not  liable  on  the  ground  of 
deceit  or  for  misleading  the  other  party.  It  is  material  in  such  cases 
that  the  party  complaining  of  a  want  of  authority  in  the  agent  should 
be  ignorant  of  the  truth  touching  the  agency.  If  he  has  a  full  knowl- 
edge of  the  facts,  or  of  such  facts  as  fairly  and  fully  put  him  upon 
inquiry  for  them,  and  he  fails  to  avail  himself  of  such  knowledge, 
or  the  means  of  knowledge  reasonably  accessible  to  him,  he  cannot 
say  that  he  was  misled  simply  on  the  ground  that  the  party  assumed 
to  act  as  agent  without  authority  in  the  absence  of  fraud. 

If  the  party  contracts  as  a  public  officer,  and  in  that  capacity  acts 
honestly,  he  will  not  ordinarily  be  personally  liable.  If  his  authority 
to  act  is  defined  by  public  statute,  all  who  contract  with  him  will  be 
presumed  to  know  the  extent  of  his  authority,  and  cannot  allege 
their  ignorance  as  a  ground  for  charging  him  with  acting  in  excess 
of  such  authority,  unless  he  knowingly  misled  the  other  party. 


III. 

UNDISCLOSED  PRINCIPAL. 

When  the  agent  is  acting  for  a  principal  whose  name  he  does 
not  disclose,  this  undisclosed  principal  is  ordinarily  liable  to  third 
persons  to  the  same  extent  as  is  a  disclosed  principal.  This  is  true 
even  though  the  third  person  gives  credit  to  the  agent,  supposing 


AGENCY  477 

him  to  be  the  principal.  However,  when  the  third  person  elects 
to  regard  the  agent  as  the  sole  contracting  party,  as  he  may  do,  he 
cannot  afterwards  proceed  against  the  principal.  When  a  contract 
under  seal  is  sealed  by  the  agent  in  his  own  name,  the  principal 
is  not  liable,  and  in  the  case  of  negotiable  instruments  only  those 
persons  whose  names  appear  on  the  paper  may  be  held. 

Ordinarily  the  undisclosed  principal  may  bring  an  action  in  his 
own  name  against  a  third  person  who  supposed  that  he  was  dealing 
with  the  agent  as  principal.  Upon  those  types  of  contract,  however, 
in  which  the  principal  is  not  liable  to  third  persons,  he  himself 
cannot  enforce  rights  against  them.  When  the  third  party  has 
refused  to  deal  with  the  principal,  when  the  contract  between  him 
and  the  agent  involves  elements  of  personal  trust  and  confidence 
in  the  agent,  or  when  the  agent  is  party  to  a  sealed  instrument,  or 
to  a  negotiable  instrument,  the  agent  alone  may  sue.  Further, 
when  the  principal  has  made  the  agent  the  apparent  owner  of 
goods,  he  is  estopped  to  set  up  his  own  title. 

A.     Liability  of  Undisclosed  Principal. 
I.     In  General. 

Fradley  v.  Hyland.  27  Fed.  4p. 

Gibson,  the  manager  of  canal  boats  belonging  to  Hyland,  in- 
curred debts  for  supplies  furnished  by  Fradley,  who  supposed  that 
Gibson  was  the  owner  and  gave  him  credit  for  the  amount  due. 
Upon  the  failure  of  Gibson,  Fradley  discovered  that  Hyland  was 
the  real  principal,  and  now  sues  him. 

Held,  that  an  undisclosed  principal  may  be  sued  unless  the 
third  party  has  looked  exclusively  to  the  agent,  and  the  principal 
has  settled  his  accounts  with  the  agent. 

Wallace,  J. 

The  general  rule  is  familiar  that,  when  goods  are  bought  by  an 
agent  who  does  not  at  the  time  disclose  that  he  is  acting  as  agent, 
the  seller,  although  he  has  relied  solely  upon  the  agent's  credit, 
may,  upon  discovering  the  principal,  resort  to  the  latter  for  payment. 
But  the  rule  which  allows  the  seller  to  have  recourse  against  an 
undisclosed  principal  is  subject  to  the  qualification  "that  the  principal 
shall  not  be  prejudiced  by  being  made  personally  liable  if  the  justice 
of  the  case  is  that  he  should  not  be  personally  liable.  If  the  prin- 
cipal has  paid  the  agent,  or  if  the  state  of  accounts  between  the  agent 
here  and  the  principal  would  make  it  unjust  that  the  seller  should 
call  on  the  principal,  the  act  of  payment  or  such  a  state  of  accounts 
would  be  an  answer  to  the  action  brought  by  the  seller,  where  he  has 


478  COMMERCIAL   LAW    CASES 

looked  to  the  responsibility  of  the  agent."  The  principal  must  re- 
spond to  and  may  avail  himself  of  a  contract  made  with  another 
by  an  undisclosed  agent.  When  he  seeks  to  enforce  a  bargain  or 
purchase  made  by  his  agent  the  rule  of  law  is  that,  if  the  agent 
contracted  as  for  himself,  the  principal  can  only  claim  subject  to  all 
equities  of  the  seller  against  the  agent.  "He  must  take  the  contract 
subject  to  all  equities,  in  the  same  way  as  if  the  agent  were  the  sole 
principal,''  and  accordingly  subject  to  any  right  of  set-off  on  the 
part  of  the  seller.  Thus  the  rights  of  the  principal  to  enforce,  and 
his  liability  upon,  a  contract  of  sale  or  purchase  made  by  his  agent, 
without  disclosing  the  fact  of  the  agency,  are  precisely  coextensive 
as  regards  the  other  contracting  party,  if  the  limitation  of  his  lia- 
bility is  accurately  stated  in  the  earlier  cases.  The  qualification  of 
the  principal's  liability  to  respond  to  his  agent's  contract,  as  stated 
in  the  earlier  authorities,  was  narrowed  by  the  interpretation  that 
the  principal  is  not  discharged  from  full  responsibility  unless  he  has 
been  led  by  the  conduct  of  the  seller  to  make  payment  to  or  settle 
with  the  agent;  and  the  doctrine  has  been  reiterated  in  many  sub- 
sequent cases,  both  in  England  and  in  this  country,  where  the  agent 
did  not  contract  as  for  himself,  but  as  a  broker,  or  otherwise  as  rep- 
resenting an  undisclosed  principal.  While  a  correct  interpretation 
of  the  rule  of  the  principal's  liability,  when  applied  to  cases  in  which 
the  seller  deals  with  the  agent  relying  upon  the  existence  of  an  un- 
disclosed principal,  is  not  to  be  applied  in  those  in  which  the  seller  has 
given  credit  solely  to  the  agent,  supposing  him  to  be  the  principal. 
The  principal  is  not  liable  when  the  seller  has  dealt  with  the  agent 
supposing  him  to  be  the  principal,  if  he  has  in  good  faith  paid  the 
agent  at  a  time  when  the  seller  still  gave  credit  to  the  agent  and  knew 
of  no  one  else.  Under  such  circumstances,  it  is  immaterial  that  the 
principal  has  not  been  misled  by  the  seller's  conduct  or  laches  into 
paying  or  settling  with  his  agent.  It  is  enough  to  absolve  him  from 
liability  that  he  has  in  good  faith  paid  or  settled  with  his  agent. 
In  the  present  case  Gibson  had  no  authority  at  all  to  make  a  purchase 
upon  the  credit  of  the  appellant.  But  as  it  appears  that  appellant, 
in  the  monthly  settlements  of  account  with  Gibson,  allowed  him  out 
of  the  earnings,  charges  for  supplies  for  which  the  latter  had  not 
actually  paid,  he  must  be  deemed  to  have  authorized  Gibson  to 
purchase  supplies  for  him  upon  Gibson's  own  credit.  Under  the 
circumstances,  if  Gibson  had  purchased  supplies,  purporting  to  act 
as  an  agent  of  appellant  in  doing  so,  appellant,  by  consenting  to  their 
being  used  for  his  benefit,  and  by  allowing  the  price  in  his  settle- 
ments with  Gibson,  would  have  been  liable  to  those  who  sold  to  him 
upon  the  theory  of  ratification.  But  as  Gibson  did  not  assume  to 
act  as  agent  in  making  the  purcliase,  there  is  no  basis  for  applying 
the  doctrine  of  ratification. 

Very  different  considerations  govern  the  case  in  which  an  agent 
who  assumes  to  represent  an  undisclosed  principal  buys  of  a  seller 
upon  credit,  and  one  in  which  the  agent  assumes  to  be  acting  for 
himself,  and  the  seller  deals  with  liim,  and  gives  him  exclusive  credit, 


AGENCY  479 

supposing  him  to  be  the  only  principal.  In  the  first,  if  the  agent 
has  authority,  express  or  implied,  to  buy  upon  credit  for  the  prin- 
cipal, or  ostensible  authority  to  do  so.  upon  which  the  seller  relies, 
then  by  the  familiar  rules  of  law,  the  contract  is  the  contract  of  the 
principal,  and  is  none  the  less  so  because  the  name  of  the  principal 
does  not  happen  to  have  been  disclosed.  The  principal  is  bound 
by  the  acts  of  his  agent  within  the  scope  of  his  real  or  apparent 
authority;  and  the  seller  understands  that,  even  though  he  may  hold 
the  agent  personally  responsible,  he  may  also  resort  to  the  undis- 
closed principal  But  in  the  other,  as  the  seller  does  not  rely  upon 
any  ostensible  authority  of  the  one  with  whom  he  contracts  to  rep- 
resent a  third  person,  he  can  only  resort  to  the  third  person  as 
principal,  and  charge  him  as  such,  when  the  purchase  is  made  by  one 
having  lawful  authority  to  bind  the  third  person.  It  is  immaterial 
in  such  a  case,  whether  the  contract  is  made  by  an  agent  who  is 
employed,  in  a  continuous  employment  or  in  a  single  transaction,  by  a 
principal,  or  whether  he  is  one  who  may  be  deemed  a  general, 
instead  of  a  special  agent.  When  the  agency  is  not  held  out  by  the 
principal  by  any  acts  or  declarations  or  implications  to  be  general  in 
regard  to  the  particular  act  or  business,  it  must  from  necessity  be 
construed  according  to  its  real  nature  and  extent;  and  the  other 
party  must  act  at  his  own  peril,  and  is  bound  to  inquire  into  the 
nature  and  extent  of  the  authority  actually  conferred.  In  such  a 
case  there  is  no  ground  to  contend  that  the  principal  ought  to  be 
bound  by  the  acts  of  the  agent  beyond  what  he  has  apparently  author- 
ized, because  he  has  not  misled  the  confidence  of  the  other  party  who 
has  dealt  with  the  agent.  It  is  therefore  difficult  to  understand  how, 
as  an  original  proposition,  it  could  be  reasonably  maintained  that 
there  is  any  liability  on  the  part  of  one  who  has  employed  another  to 
manage  his  interests  in  a  business,  or  series  of  transactions,  in  which, 
as  an  incident,  purchases  of  goods  are  to  be  made,  has  given  him 
instructions  not  to  purchase  on  credit,  and  has  supplied  him  with 
funds  to  purchase  for  cash,  to  a  seller  who  has  sold  to  the  person  em- 
ployed on  credit,  and  dealt  with  him  only  as  principal.  Of  course  he 
would  be  liable,  and  the  instructions  not  to  buy  on  credit  would  go 
for  nothing,  if  he  did  not  supply  the  agent  with  funds  to  pay  for  the 
necessary  goods,  because  in  that  case  the  agent  would  have  implied 
authority  to  buy  them  on  credit.  So,  also,  in  a  case  which  may  be 
supposed,  where  a  principal  knows,  or  ought  to  know,  that  the  agent 
is  buying  on  credit  in  his  own  name,  yet  the  principal  takes  all  the 
income  of  the  business  without  making  any  provision  for  payment 
to  those  who  have  trusted  the  agent,  the  principal  would  be  liable, 
because  in  such  a  case  his  conduct  would  be  inconsistent  with  good 
faith,  and  he  ought  not  to  be  permitted  to  avail  himself  of  the  bene- 
fits without  incurring  full  responsibility  for  the  agent's  act.  But  it 
is  probably  too  late  to  consider  the  questions  thus  suggested  upon 
principle;  and  it  may  be  accepted  as  law  that  the  seller,  under  the 
circumstances  of  a  case  like  the  present,  upon  discovery  of  the  prin- 
cipal can  resort  to  and  recover  of  him,  if  he  has  not  bona  fide  paid 


480  COMMERCIAL    LAW    CASES 

the  agent  in  the  meantime,  or  has  not  made  such  a  change  in  the 
state  of  the  account  between  the  agent  and  himself  that  he  would 
suffer  loss  if  he  should  be  compelled  to  oay  the  seller. 

2.  Effect  of  Refusal  to  Deal  with  Principal. 

Kayton  v.  Barnett.    116  N.  Y.  62^. 

The  plaintiffs  sold  Bishop  several  machines  for  $4,500,  of 
which  $3,000  was  paid  and  the  remainder  unpaid.  Bishop  died 
without  having  paid  the  balance.  The  plaintiffs  now  sue  the  de- 
fendants on  the  ground  that  Bishop  as  their  agent  bought  the 
property  for  them  without  disclosing  his  principal. 

Held,  that  an  undisclosed  principal  may  be  sued  upon  a  contract 
made  in  his  behalf  by  an  agent,  even  after  a  refusal  to  deal  with 
the  principal. 

Follctt,  C.  J. 

When  goods  are  sold  on  credit  to  a  person  whom  the  vendor 
believes  to  be  the  purchaser,  and  he  afterwards  discovers  that  the 
person  credited  bought  as  agent  for  another,  the  vendor  has  a  cause 
of  action  against  the  principal  for  the  purchase-price.  The  defendants 
concede  the  existence  of  this  general  rule,  but  assert  that  it  is  not 
applicable  to  this  case,  because,  while  Bishop  and  the  plaintiffs  were 
negotiating,  they  stated  they  would  not  sell  the  property  to  the  de- 
fendants, and  Bishop  assured  them  he  was  buying  for  himself  and  not 
for  them.  Notwithstanding  the  assertion  of  the  plaintiffs  that  they 
would  not  sell  to  the  defendants,  they,  through  the  circumvention  of 
Bishop  and  the  defendants,  did  sell  the  property  to  the  defendants, 
who  have  had  the  benefit  of  it,  and  have  never  paid  the  remainder  of 
the  purchase-price  pursuant  to  their  agreement.  Bishop  was  the 
defendants'  agent.  Bishop's  mind  was,  in  this  transaction,  the  de- 
fendants' mind,  and  so  the  minds  of  the  parties  met,  and  the  defendants 
having,  through  their  own  and  their  agent's  deception,  acquired  the 
plaintiff's  property  by  purchase,  cannot  successfully  assert  that  they 
are  not  liable  for  the  remainder  of  the  purchase-price  because  they, 
through  their  agent,  succeeded  in  inducing  the  defendants  to  do 
that  which  they  did  not  intend  to  do,  and,  perhaps,  would  not  have 
done  had  the  defendants  not  dealt  disingenuously. 

3.  Election  to  Hold  Agent, 

Lindquist  v.  Dickson.  pS  Minn.  ^6p. 

Lindquist  decorated  and  repaired  a  house  belonging  to  Mrs. 
Dickson,  under  a  contract  made  with  Joseph  M.  Dickson,  her 
husband,  whom  Lindf|uist  supposed  to  be  the  real  principal.  Lind- 
quist recovered  a  judgment  against  Dickson  which  was  not  paid, 
and  now  sues  Mrs.  I3ickson.     The  defense  is  that  having  sued 


AGENCY  481 

the  agent,  the  third  party  is  not  entitled  to  sue  the  undisclosed 
principal. 

Held,  that  when  the  third  party  elects  to  regard  the  agent  as 
the  sole  contracting  party,  he  cannot  afterwards  sue  the  undis- 
closed principal,  but  securing  a  judgment  is  not  necessarily  such 
an  election. 

Start,  C.  J. 

The  general  rule  is  that,  where  a  simple  contract,  by  parol  or 
writing,  is  made  by  an  authorized  agent  without  disclosing  his  prin- 
cipal, and  the  other  contracting  party  subsequently  discovers  the  real 
party,  he  may  abandon  his  right  to  look  to  the  agent,  personally,  and 
resort  to  the  principal.  But  whether  the  creditor  can  proceed  against 
the  undiscovered  principal,  after  he  has  obtained  a  judgment  on  his 
claim  against  the  agent,  is  a  question  as  to  which  the  adjudged  cases 
are  conflicting. 

The  general  principle  is  undisputed  that,  when  a  person  con- 
tracts with  another  who  is  in  fact  an  agent  of  an  undisclosed  prin- 
cipal, he  may  upon  the  discovery  of  the  principal  resort  to  him  or  to 
the  agent  with  whom  he  dealt  at  his  election.  But  if,  after  having 
come  to  a  knowledge  of  all  the  facts,  he  elects  to  hold  the  agent, 
he  cannot  afterwards  resort  to  the  principal.  Nothing  short  of 
satisfaction  of  the  judgment  against  the  agent  would  discharge  the 
principal.  It  is  a  question  of  election.  Election  implies  full  knowledge 
of  the  facts  necessary  to  enable  a  party  to  make  an  intelligent  and 
deliberate  choice. 

We  therefore  hold  upon  principle,  and  what  seems  to  be  the 
weight  of  judicial  opinion,  that:  If  a  person  contracts  with  another, 
who  is  in  fact  an  agent  of  an  undisclosed  principal,  and,  after  learn- 
ing all  the  facts,  brings  an  action  on  the  contract  and  recovers  judg- 
ment against  the  agent,  such  judgment  will  be  a  bar  to  an  action 
against  the  principal.  But  an  unsatisfied  judgment  against  the  agent 
is  not  a  bar  to  an  action  against  the  undiscovered  principal  when 
discovered,  if  the  plaintiff  was  ignorant  of  the  facts  as  to  the  agency 
when  he  prosecuted  his  action  against  the  agent. 

4.     Suit  upon  Sealed  Instrument. 

Briggs  v.  Partridge.  64  N.  Y.  ^57- 

The  plaintiffs  entered  into  a  sealed  agreement  with  Hurlburd 
whereby  they  contracted  to  sell  certain  real  estate  to  Hurlburd, 
who,  unknown  to  the  plaintiffs,  was  acting  as  agent  for  the  de- 
fendants. Upon  failure  of  Hurlburd  to  take  a  conveyance,  the 
plaintiffs  sue  the  defendants,  who  contend  that  only  the  agent 
of  an  undisclosed  principal  may  be  sued  upon  a  contract  sealed  by 
him. 

Held,  that  only  the  parties  to  a  sealed  instrument  may  be  sued 
upon  it. 


482  COMMERCIAL    LAW    CASES 

Andrews,  J. 

The  plaintiff  invokes  in  his  behalf  the  doctrine  that  must  now 
be  deemed  to  be  the  settled  law  of  this  court,  and  which  is  sup- 
ported by  high  authority  elsewhere,  that  a  principal  may  be  charged 
upon  a  written  parol  executory  contract  entered  into  by  an  agent, 
in  his  own  name,  within  his  authority,  although  the  name  of  the 
principal  does  not  appear  in  the  instrument,  and  was  not  disclosed, 
and  the  party  dealing  with  the  agent  supposed  that  he  was  acting  for 
himself,  and  this  doctrine  obtains  as  well  in  respect  to  contracts  which 
are  required  to  be  in  writing,  as  to  those  where  a  writing  is  not  essen- 
tial to  their  validity. 

In  some  of  the  earlier  cases  the  doctrine  that  a  written  contract 
of  the  agent  could  be  enforced  against  the  principal,  was  stated  with 
the  qualification,  that  it  applied  when  it  could  be  collected  from  the 
whole  instrument,  that  the  intention  was  to  bind  the  principal.  This 
qualification  is  no  longer  regarded  as  an  essential  part  of  the  doctrine. 
Whatever  ground  there  may  have  been  originally  to  question  the  legal 
soundness  of  the  doctrine  referred  to,  it  is  now  too  firmly  established 
to  be  overthrown,  and  I  am  of  opinion  that  the  practical  effect  of 
the  rule  as  now  declared  is  to  promote  justice  and  fair  dealing. 
There  is  a  well-recognized  exception  to  the  rule  in  the  case  of  notes 
and  bills  of  exchange,  resting  upon  the  law  merchant.  Persons 
dealing  with  negotiable  instruments  are  presumed  to  take  them  on  the 
credit  of  the  parties  whose  names  appear  upon  them;  and  a  person 
not  a  party  cannot  be  charged  upon  proof  that  the  ostensible  party 
signed  or  indorsed  as  his  agent. 

We  return,  then,  to  the  question  originally  stated.  Can  a  con- 
tract under  seal,  made  by  an  agent  in  his  own  name  for  the  purchase 
of  land,  be  enforced  as  the  simple  contract  of  the  real  principal  when 
he  shall  be  discovered?  No  authority  for  this  broad  proposition 
has  been  cited.  There  are  cases  which  hold  that  when  a  sealed 
contract  has  been  executed  in  such  form,  that  it  is,  in  law,  the 
contract  of  the  agent  and  not  of  the  principal,  but  the  principal's 
interest  in  the  contract  appears  upon  its  face  and  he  has  received  the 
benefit  of  performance  by  the  other  party  and  has  ratified  and  con- 
firmed it  by  acts  in  pais,  and  the  contract  is  one  which  would  have 
been  valid  without  a  seal,  the  principal  may  be  made  liable  in  as- 
sumpsit upon  the  promise  contained  in  the  instrument,  which  may  be 
resorted  to  to  ascertain  the  terms  of  the  agreement. 

The  plaintiff's  agreement  in  this  case  was  with  Hurlburd  and 
not  with  the  defendant.  The  plaintiff  has  recourse  against  Hurl- 
burd on  his  covenant,  which  was  the  only  remedy  which  he  con- 
templated when  the  agreement  was  made.  No  ratification  of  the  con- 
tract by  the  defendant  is  shown.  To  change  it  from  a  specialty  to 
a  simple  contract,  in  order  to  charge  the  defendant,  is  to  make  a 
different  contract  from  the  one  the  parties  intended.  A  seal  has 
lost  most  of  its  former  significance,  but  the  distinction  between  spe- 
cialties and  simple  contracts  is  not  obliterated.     A  seal  is  still  evi- 


AGENCY  483 

dence,  though  not  conclusive,  of  a  consideration.  The  rule  of  limita- 
tion in  respect  to  the  two  classes  of  obligations  is  not  the  same.  We 
find  no  authority  for  the  proposition  that  a  contract  under  seal  may 
be  turned  into  the  simple  contract  of  a  person  not  in  any  way  ap- 
pearing on  its  face  to  be  a  party  to  or  interested  in  it,  on  proof  dehors 
the  instrument,  that  the  nominal  party  was  acting  as  the  agent  of 
another,  and  especially  in  the  absence  of  any  proof  that  the  alleged 
principal  has  received  any  benefit  from  it,  or  has  in  any  way  ratified 
it,  and  we  do  not  feel  at  liberty  to  extend  the  doctrine  applied  to 
simple  contracts  executed  by  an  agent  for  an  unnamed  principal  so  as 
to  embrace  this  case.  The  general  rule  is  "Where  a  contract  is  made 
by  deed,  under  seal  on  technical  grounds,  no  one  but  a  party  to  the 
deed  is  liable  to  be  sued  upon  it,  and  therefore  if  made  by  an  attorney 
or  agent  it  must  be  made  in  the  name  of  the  principal  in  order  that  he 
may  be  a  party,  because  otherwise  he  is  not  bound  by  it." 

5.     Suit  Upon  Negotiable  Instrument. 

Manufacturers  and  Traders'  Bank  v.  Love.  Jj  App.  Div. 
(N.  Y.J  561. 

Johnston,  who  conducted  a  lumber  business  as  agent  for  Mabel 
G.  Love,  the  defendant,  signed  a  note  for  lumber  purchased  in  the 
course  of  the  business,  as  "J-  W-  Johnston,  Agent."  This  note 
was  indorsed  to  the  plaintiff,  who  sues  the  defendant  upon  it  as 
an  undisclosed  principal. 

Held,  that  only  those  persons  whose  names  appear  upon  a 
negotiable  paper  may  be  sued  upon  it. 

Ward,  J. 

Whatever  may  be  the  rule  as  to  other  contracts  not  under  seal, 
the  law  is  firmly  established  in  this  state  as  to  commercial  paper 
that  persons  dealing  with  negotiable  instruments  are  presumed  to  take 
them  on  the  credit  of  the  parties  whose  names  appear  upon  them, 
and  a  person  not  a  party  cannot  be  charged  upon  proof  that  the 
ostensible  party  signed  or  indorsed  as  his  agent.  It  is  also  held  that 
the  negotiable  instrument  binds  only  the  ostensible  maker,  though 
the  word  "agent"  is  attached  to  his  signature;  no  principal  being 
named  in  the  body  of  the  instrument  or  indicated  by  the  signature. 
The  law  merchant  surrounds  the  negotiable  paper  in  the  hands  of 
a  bona  fide  holder  with  a  credit  not  given  to  other  contracts,  and 
protects  him  against  hidden  equities  of  which  he  has  no  notice,  and 
permits  him  to  recover  against  the  party  whose  name  is  signed 
to  the  instrument,  though  there  be  attached  to  his  name,  the  word 
"agent ;"  and  he  is  not  bound  to  search  for  a  principal  unknown  to  the 
instrument  itself.  Nor  can  he  so  do.  The  rights  of  the  holder  are 
confined  to  the  parties  to  the  instrument,  and  he  must  rely  upon  them 
alone,  except  that  he  can  establish  that  the  name  used  as  the  signature 


484  COMMERCIAL    LAW    CASES 

to  the  instrument  has  been  adopted  by  the  assumed  principal,  or  by 
the  person  not  named  in  the  instrument,  as  his  own,  in  transacting 
the  business.    This  may  be  done. 

6.  Effect  of  Disclosure  of  Principal  in  Negotiable  Instrument. 

Jump  V.  Sparling.  218  Mass.  J24. 

A  note  was  signed  as  follows :  "J-  H.  Sparling,  Treas.,  Strat- 
ton  Engine  Company" ;  "David  F.  Burns,  Pres.,  Stratton  Engine 
Company."  The  signers  intended  that  this  should  be  a  note  of 
the  Stratton  Engine  Company.  Suit  is  brought  by  the  trustee  in 
bankruptcy  of  the  payee  against  Sparling,  who  contends  that  the 
note  is  a  note  of  the  corporation,  and  not  his  own  note. 

Held,  that  under  the  Negotiable  Instruments  Act,  an  agent 
disclosing  his  principal  is  exempt  from  liability. 

Rugg,  C.  J. 

Under  the  law  previous  to  the  enactment  of  the  Negotiable  In- 
struments Act,  the  defendant  corporation  would  not  have  been  held 
on  this  note.  It  would  have  been  not  the  note  of  the  corporation, 
but  simply  the  personal  note  of  the  two  individuals  who  signed.  A 
change  in  the  law  in  this  respect  has  been  wrought  by  that  act. 
"Where  the  instrument  contains,  or  a  person  adds  to  his  signature, 
words  indicating  that  he  signs  for  or  on  behalf  of  a  principal,  or  in 
a  representative  capacity,  he  is  not  liable  on  the  instrument  if  he  was 
duly  authorized;  but  the  mere  addition  of  words  describing  him  as 
an  agent,  or  as  filling  a  representative  character,  without  disclosing 
his  principal,  does  not  exempt  him  from  personal  liability."  These 
words  plainly  imply  that  if  the  person  signing  a  promissory  note  adds 
to  his  signature  words  describing  himself  as  an  agent  or  as  occupy- 
ing some  representative  position  which  at  the  same  time  discloses 
the  name  of  the  principal,  he  shall  be  exempted  from  personal  lia- 
bility, while,  if  he  omits  the  name  of  the  principal,  although  adding 
words  of  agency,  he  will  be  held  liable  personally  and  the  words  of 
agency  will  be  treated  simply  as  dcscriptio  personae.  In  this  re- 
spect the  common  law  rule  of  this  Commonwealth  whereby  agents 
bind  themselves  by  a  form  of  signing  a  note  such  as  the  one  at 
bar,  even  though  acting  with  authority,  is  abrogated.  The  agent 
now  relieves  himself  from  liability  by  a  form  of  signature  whereby 
he  is  described  as  agent  of  a  disclosed  principal.  Of  course  if  one 
signs  as  agent  when  he  is  not,  he  is  liable  as  principal. 

7.  Effect  of  Clothing  Agent  with  Indicia  of  Ownership. 

Nixon  V.  Brown.  57  N .  H.  J4. 

Nixon  employed  Mason  to  buy  a  horse  for  him.  Mason  bought 
the  horse,  paid  for  it  with  Nixon's  money,  and  took  a  bill  of  sale 


AGENCY  485 

in  his  own  name.  Afterwards,  he  informed  Nixon  of  what  he  had 
done  and  showed  him  the  hill  of  sale.  Nixon  permitted  him  to  go 
away  with  the  horse  and  bill  of  sale  still  in  his  possession.  Mason 
then  sold  the  horse  to  Brown,  showing  him  the  bill  of  sale,  and 
absconded  with  the  proceeds.  Nixon  sues  to  recover  the  value  of 
the  horse. 

Held,  that  a  principal  who  has  invested  his  agent  with  indicia 
of  ownershi    is  bound  by  a  sale  made  by  that  agent. 

Ladd,  J. 

The  general  rule  that  the  possession  of  goods  by  a  bailee  or 
servant  gives  him  no  power  to  make  any  disposition  of  them,  except 
by  virtue  of  actual  authority  received  from  the  owner,  is  so  well 
settled  as  to  be  quite  elementary.  But  there  are  several  exceptions 
to  this  rule,  quite  as  well  settled,  and  quite  as  well  understood  as  the 
rule  itself.  One  relates  to  money,  bank  bills,  checks,  and  notes  pay- 
able to  the  bearer  or  transferable  by  delivery.  Another  exception, 
in  England,  relates  to  sales  in  market  overt.  But  as  we  have  no 
markets  overt  in  this  State,  that  exception  has  no  existence  here. 
Another  is  where  the  possession  of  the  bailee,  from  the  nature  of 
his  employment,  implies  an  authority  to  sell, — as,  when  goods  are 
left  with  an  auctioneer,  or  factor,  a  sale  by  such  bailee  though  he 
had  no  actual  authority,  will  bind  the  owner.  The  reason  given  for 
this  last  exception  is  that  the  owner  has  allowed  the  bailee  in  posses- 
sion to  hold  out  the  appearance  of  an  authority  to  sell,  which  would 
deceive  and  defraud  the  fair  purchaser  if  the  law  allowed  the  validity 
of  the  sale  to  be  questioned.  This  statement  suggests  the  ground  of 
my  decision  in  this  case.  The  facts,  specially  stated  by  the  referee, 
show  most  clearly  to  my  mind  that  the  plaintiff  allowed  Mason,  while 
he  retained  possession  of  the  horse,  to  hold  out  the  appearance  of 
ownership  in  himself,  and  so  of  an  authority  to  sell,  which  would 
deceive  and  defraud  a  fair  purchaser  if  the  law  permitted  the  validity 
of  the  sale  to  be  questioned. 

8.     Effect  of  Factor's  Acts. 

Focrderer  v.  Tradesmen's  National  Bank.  loy  Fed.  2ig. 

Jagode  &  Co.  received  from  the  Keen-Sutterle  Company, 
for  sale,  a  consignment  of  wool  belonging  to  the  plaintilT,  and 
made  advances  to  the  Keen-Sutterle  Company  without  notice  that 
the  latter  was  not  the  actual  owner.  They  then  shipped  the  wool 
to  purchasers,  but  before  delivery  the  defendant  bank  seized  it 
under  a  claim  arising  out  of  the  possession  of  certain  warehouse 
receipts.  Upon  finding  that  its  claim  was  not  good,  the  bank 
retained  the  wool  under  an  agreement  with  Jagode  &  Co.  to 
pay  the  full  value,  with  damages  for  the  original  taking.  The 
plaintiff  now  sues  the  bank  for  the  value  of  the  wool. 


486  COMMERCIAL   LAW    CASES 

Held,  that  under  the  factor's  act,  title  passes  to  a  person  re- 
ceiving a  pledge  of  property  from  the  factor. 

Wallace,  Cir.  J. 

Were  it  not  for  the  factor's  act  of  the  state  of  Pennsylvania, 
it  would  be  entirely  clear  that  neither  Jagode  &  Co.  nor  the  defend- 
ant could  be  protected  under  any  title  derived  from  the  Keen- 
Sutterle  Company.  A  factor  is  an  agent  for  the  owner  of  the  goods 
consigned,  and  must  observe  the  instructions  of  his  principal  in  re- 
spect to  them,  whether  express  or  implied,  and  cannot  deal  with  the 
property  as  his  own.  In  the  absence  of  instructions  to  the  contrary, 
he  is  empowered  to  sell  the  goods  of  his  principal  according  to  the 
usage  of  the  trade.  Upon  a  sale  made  by  the  factor  conformably  to 
his  authority,  the  principal  is  divested  of  his  title  in  the  goods, 
and  the  title  passes  to  the  purchaser.  He  has  a  lien  upon  the  goods 
while  they  are  in  his  possession  for  his  advances  and  commissions, 
and  upon  the  proceeds  of  the  sale.  He  has  no  authority  to  use  or 
pledge  them  for  his  own  benefit,  except  for  the  purpose  of  reim- 
bursing himself  when  the  principal,  after  reasonable  notice  and  de- 
mand, fails  to  repay  his  advances.  He  cannot  ordinarily  bind  his 
principal  by  a  disposition  of  the  goods  not  made  in  the  usual  course 
of  business.  He  must  sell  in  the  market  where  he  transacts  busi- 
ness. He  cannot  sell  by  way  of  barter.  H  he  makes  an  unauthorized 
disposition  of  the  goods,  his  lien  is  lost;  and  such  a  disposition  of 
them  does  not  transfer  any  right  as  against  the  principal,  even  to 
the  extent  of  the  lien.  The  principal  is  not  even  obliged  to  tender 
to  the  pawnee  the  balance  due  from  the  principal  to  the  factor;  for 
the  lien  which  the  factor  might  have  had  for  such  balance  is  personal, 
and  cannot  be  transferred  by  his  tortious  act  in  pledging  the  goods 
for  his  own  gain. 

As  persons  dealing  with  an  agent  are  bound  to  take  notice  of 
the  extent  of  his  powers,  a  transfer  of  property  by  a  factor  not 
authorized  by  the  powers  delegated  to  him  by  the  principal  creates 
no  right  in  the  person  dealing  with  him,  as  against  the  principal. 
It  follows  that  innocent  purchasers  or  pledgees,  who,  relying  upon 
the  indicia  of  title  afforded  by  his  possession  of  the  goods,  have 
dealt  with  the  factor,  supposing  him  to  be  the  actual  owner,  acquire 
no  title  to  the  property  where  the  transfer  is  unauthorized  by  the 
express  or  implied  terms  of  the  principal's  instructions.  Applying 
these  rules  to  the  present  case,  inasmuch  as  the  Keen-Sutterle  Com- 
pany, the  factor  of  the  plaintiff,  transcended  its  authority  in  con- 
signing the  wool  upon  advances  to  Jagode  &  Co.,  the  latter,  except 
for  the  provisions  of  the  factor's  act,  would  have  acquired  no  title 
to  the  property  as  against  the  real  owner,  the  plaintiff;  and,  as 
Jagode  &  Co.  could  not  transfer  a  better  title  than  they  had  them- 
selves, the  defendant  could  not  have  acquired  any  title  to  the  wool 
through  Jagode  &  Co.  as  against  the  plaintiff. 

The  factor's  act  of  Pennsylvania  is  designed  to  remedy  the  hard- 


AGENCY  487 

ship  of  the  common  law  whereby  "factors  authorized  to  sell  the  goods 
of  their  principal,  and  who  are  held  out  to  the  world  as  the  owners 
thereof,  have  no  power  to  pledge  the  goods  in  their  possession  for 
advances  made  by  persons  who  have  reason  to  believe  that  they 
are  the  actual  owners."  Unlike  cognate  legislation  in  some  of  the 
other  states,  the  act  does  not  purport  to  give  validity  to  all  contracts 
made  by  a  factor  in  respect  to  the  disposition  of  the  goods  with 
innocent  third  persons  who  advance  money  or  negotiable  instruments 
upon  a  deposit  or  pledge  of  the  goods  by  the  factor.  The  third 
section  of  the  act  provides  as   follows : 

"Whenever  a  consignee  or  factor,  having  possession  of  mer- 
chandise, with  authority  to  sell  the  same,  shall  dispose  of  or  pledge 
such  merchandise  or  any  part  thereof,  with  any  person  as  a  security 
for  any  money  advanced  or  negotiable  instrument  given  by  him  upon 
the  faith  thereof,  such  other  person  shall  acquire  by  virtue  of  such 
contract  the  same  interest  in  and  authority  over  the  said  merchan- 
dise as  he  would  have  acquired  thereby  if  such  consignee  or  factor 
had  been  the  actual  owner  thereof ;  provided,  that  such  person  shall 
not  have  notice  by  document  or  otherwise,  before  the  time  of  such 
advance  or  receipt,  that  the  holder  of  such  merchandise  or  docu- 
ment is  not  the  actual  owner  of  such  merchandise." 

This  statute,  being  in  derogation  of  the  common  law,  is  to  be 
strictly  construed. 

But,  upon  the  most  literal  construction,  the  terms  of  the  sec- 
tion protect  a  factor  who  has  received  from  another  factor  a  con- 
signment of  merchandise  in  the  possession  of  the  latter,  and  made 
advances  thereon,  without  notice  by  document  or  otherwise  that 
the  consigning  factor  was  not  the  actual  owner.  The  factor  thus 
receiving  a  consignment  and  making  advances  thereon  acquires,  by 
the  explicit  language  of  the  section,  the  same  "interest  in  and 
authority  over"  the  merchandise  as  though  the  consigning  factor 
were  at  the  time  its  actual  owner.  Until  his  lien  is  satisfied  he  has 
the  same  right  to  sell  or  dispose  of  the  merchandise  that  he  would 
have  had  if  it  had  been  consigned  to  him  by  the  actual  owner,  and 
any  sale  or  transfer  of  it  made  by  him  conformably  with  a  factor's 
duty  to  his  principal  will  divest  the  title  of  the  real  owner.  Unless 
he  can  sell  the  merchandise,  his  lien  would  be  of  no  value,  and  the 
statute  would  be  merely  an  illusory  protection  to  him.  The  terms 
of  the  section  apply  to  and  control  one  transaction  between  the 
Keen-Sutterle  Company  and  Jagode  &  Co.  The  Keen-Sutterle  Com- 
pany, being  in  possession  of  the  wool,  consigned  it  to  Jagode  &  Co., 
and  the  latter  made  the  advances  without  notice  that  the  Keen- 
Sutterle  Company  was  not  the  actual  owner.  Consequently  Jagode 
&  Co.,  by  force  of  the  statute,  became  entitled  to  deal  with  the 
wool  exactly  as  though  the  Keen-Sutterle  Company  had  been  the 
owner,  and  had  consigned  it  to  them  as  its  own  factors. 

We  are  of  the  opinion  that  the  defendant  acquired  a  valid  title 
to  the  wool  under  the  arrangement  made  by  Jagode  &  Co.  in  the 
replevin  suit. 


488  COMMERCIAL   LAW    CASES 

B.     Liability  of  Third  Person  to  Undisclosed  Principal. 

I.     General  Rule. 

Huntington  v.  Knox,  y  Cush.  (Mass.)  j/J. 

Huntington  sold  hemlock  belonging  to  his  wife,  the  plaintiff, 
to  Knox,  receiving  a  partial  payment  for  which  he  gave  a  receipt 
indicating  that  the  contract  was  between  himself  and  Knox.  Mrs. 
Huntington  sues  for  the  price.  The  defendant  claims  that  only 
those  parties  whose  names  appear  on  a  written  contract  may  sue 
or  be  sued  upon  it. 

Held,  that  an  undisclosed  principal  may  sue  upon  a  written 
contract  made  by  an  agent. 

Shaw,  C.  J. 

It  is  now  settled  by  authorities,  that  when  the  property  of  one 
is  sold  by  another,  as  agent,  if  the  principal  gives  notice  to  the 
purchaser  before  payment,  to  pay  to  himself,  and  not  to  the  agent, 
the  purchaser  is  bound  to  pay  the  principal,  subject  to  any  equities 
of  the  purchaser  against  the  agent. 

When  a  contract  is  made  by  deed  under  seal,  on  technical 
grounds,  no  one  but  a  party  to  the  deed  is  liable  to  be  sued  upon  it; 
and  therefore,  if  made  by  an  agent  or  attorney,  it  must  be  made  in 
the  name  of  the  principal,  in  order  that  he  may  be  a  party,  because 
otherwise  he  is  not  bound  by  it. 

But  a  different  rule,  and  a  far  more  liberal  doctrine,  prevails  in 
regard  to  a  written  contract  not  under  seal.  It  is  competent  to  show 
that  one  or  both  of  the  contracting  parties  were  agents  for  other 
persons,  and  acted  as  such  agents  in  making  the  contract  of  sale, 
so  as  to  give  the  benefit  of  the  contract,  on  the  one  hand  to,  and 
charge  with  liability  on  the  other,  the  unnamed  principals;  and  this 
whether  the  agreement  be  or  be  not  required  to  be  in  writing,  by  the 
statute  of  frauds.  But  the  courts  mark  the  distinction  broadly  be- 
tween such  a  case  and  a  case  where  an  agent,  who  has  contracted 
in  his  own  name,  for  the  benefit,  and  by  the  authority  of  a  principal, 
seeks  to  discharge  himself  from  liability,  on  the  ground  that  he 
contracted  in  the  capacity  of  an  agent.  The  doctrine  proceeds  on  the 
ground  that  the  principal  and  agent  may  each  be  bound;  the  agent, 
because  by  his  contract  and  promise  he  has  expressly  bound  himself; 
and  the  principal,  because  it  was  a  contract  made  by  his  authority 
for  his  account.  It  is  analogous  to  the  ordinary  case  of  a  dormant 
partner.  He  is  not  named  or  alluded  to  in  the  contract;  yet  as  the 
contract  is  shown  in  fact  to  be  made  for  his  benefit,  and  by  his 
authority,  he  is  liable. 

So,  on  the  otlicr  hand,  where  the  contract  is  made  for  the  bene- 
fit of  one  not  named,  tbough  in  writing,  the  latter  may  sue  on  the 


AGENCY  489 

contract,  jointly  with  others,  or  alone,  according  to  the  interest.  The 
rights  and  liabilities  of  a  principal  upon  a  written  instrument  exe- 
cuted by  his  agent  do  not  depend  upon  the  fact  of  the  agency  appear- 
ing on  the  instrument  itself,  but  upon  the  facts;  i,  that  the  act 
is  done  in  the  exercise,  and  2,  within  the  limits,  of  the  powers 
delegated ;  and  these  are  necessarily  inquirable  into  by  evidence. 

2.    Right  to  Assert  Debt  Due  from  Agent. 

Montagu  v.  Forwood.  (i8ps)  2  Q.  B.  (Eng.)  S50- 

The  plaintiffs  employed  Beyts  &  Craig,  merchants  in  London, 
as  brokers  to  collect  insurance  money  due  clients  of  the  plaintiffs 
upon  a  loss  incurred.  Beyts  &  Craig  employed  the  defendants, 
brokers  at  Lloyds,  to  collect  the  money  for  them,  which  the  de- 
fendants did  at  a  time  when  Beyts  &  Craig  owed  them  a  much 
larger  amount.  The  defendants  did  not  know  that  Beyts  &  Craig 
were  acting  as  agents  for  an  undisclosed  principal  and  they 
applied  the  proceeds  to  the  bill  which  Beyts  &  Craig  owed  them. 
The  plaintiffs  now  sue  to  recover  the  amount  of  the  collection. 

Held,  that  a  claim  against  an  agent  acting  for  an  undisclosed 
principal  may  be  set  off  against  the  claim  of  that  principal. 

Lord  Esher,  M.  R. 

Where  a  factor,  dealing  for  a  principal,  but  concealing  that 
principal,  delivers  goods  in  his  own  name,  the  person  contracting 
with  him  has  a  right  to  consider  him  to  all  intents  and  purposes  as 
the  principal ;  and,  though  the  real  principal  may  appear  and  bring 
an  action  upon  that  contract  against  the  purchaser  of  the  goods, 
yet  that  purchaser  may  set  off  any  claim  he  may  have  against  the 
factor  in  answer  to  the  demand  of  the  principal.  This  has  been  long 
settled.  The  same  principle  applies  to  any  one  who  is  authorized 
to  sell  goods,  or  to  receive  money  for  his  principal,  when  there  is 
nothing  to  lead  the  person  who  deals  with  him  to  suppose,  and  he 
does  not  in  fact  know,  that  he  is  acting  as  an  agent.  When  a  person 
who  sells  goods  is  known  by  the  purchaser  to  be  a  broker — that  is, 
an  agent — the  case  is  entirely  different:  the  purchaser  cannot  then 
set  off  a  debt  due  to  him  from  the  broker  against  the  demand  of  the 
principal. 

Bowen,  L.  J. 

The  principle  is  not  confined  to  the  sale  of  goods.  If  A.  em- 
ploys B.  as  his  agent  to  make  any  contract  for  him,  or  to  receive 
money  for  him,  and  B.  makes  a  contract  with  C,  or  employs  C.  as  his 
agent,  if  B.  is  a  person  who  would  be  reasonably  supposed  to  be 
acting  as  a  principal,  and  is  not  known  or  suspected  by  C.  to  be 
acting  as  an  agent  for  any  one,  A.  cannot  make  a  demand  against 
C.  without  the  latter  being  entitled  to  stand  in  the  same  position  as 


490  COMMERCIAL   LAW    CASES 

if  B.  had  in  fact  been  a  principal.  If  A.  allowed  his  agent  B.  to 
appear  in  the  character  of  a  principal  he  must  take  the  consequences. 
Here  Beyts  &  Craig  were  allowed  by  the  plaintiffs  to  deal  with 
the  defendants  as  if  they  had  been  dealing  on  their  own  account, 
and  the  defendants  who  dealt  with  Beyts  &  Craig  are  entitled  to 
stand  in  the  position  in  which  they  would  have  stood  if  Beyts  & 
Craig  had  really  been  dealing  as  principals. 

3.     Exclusive  Credit  Given  to  Agent. 

Moore  v.  Vulcanite  Portland  Cement  Co.  121  App.  Div. 
(N.  Y.)  667. 

The  Vulcanite  Portland  Cement  Company  made  a  contract  with 
Hedden  &  Sons  whereby  it  agreed  to  sell  them  cement.  After 
some  question  by  the  Vulcanite  Company  whether  Hedden  & 
Sons  was  the  real  principal,  and  after  an  answer  by  Hedden  & 
Sons  that  it  was  the  real  principal,  proceedings  were  instituted  by 
the  Vulcanite  Company  to  recover  for  cement  already  shipped. 
Upon  payment  of  this  claim,  Hedden  &  Sons  demanded  the  remain- 
ing cement  due  under  the  contract,  which  the  Vulcanite  Company 
then  refused  to  ship.  This  action  is  brought  for  breach  of  the 
contract  to  deliver  the  remainder  by  Moore,  who  contends  that 
Hedden  &  Sons  made  the  contract  on  behalf  of  himself  and  others 
as  undisclosed  principals. 

Held,  that  when  exclusive  credit  is  given  to  an  agent,  the  agent 
alone  may  sue. 

Ingraham,  J. 

It  is  undoubtedly  the  well-settled  general  rule  that  "where 
an  agent  enters  into  a  contract  as  though  made  for  himself,  and  the 
existence  of  a  principal  is  not  disclosed,  the  principal  may,  as  a 
general  rule,  enforce  the  contract."  There  are,  however,  exceptions 
to  this  general  rule,  as  "where  a  personal  trust  or  confidence  is  re- 
posed by  the  other  party  in  the  agent  who  contracted  in  his  own 
name ;"  and  this  is  based  upon  another  general  princii)le,  i.  e.,  "Every 
one  has  a  right  to  select  and  determine  with  whom  he  will  contract, 
and  cannot  have  another  person  thrust  upon  him  without  his  con- 
sent. In  the  familiar  i)lnasc  of  Lord  Denman,  'You  have  a  right  to 
the  benefit  you  contemplate  from  the  character,  credit  and  substance 
of  the  party  with  whom  you  contract.'  " 

It  seems  to  me  that  this  presents  an  exception  to  the  general 
rule  that  an  undisclosed  i)rincipal  can  enforce  a  contract  made 
by  [his]  agent  for  [his|  benefit,  as  i)resenling  a  case  in  which  the 
vendor  expressly  refused  to  make  a  contract  witli  any  party  except  the 
one  of  its  own  selection,  and  is  brought  directly  within  the  excep- 
tion that  the  "principal  also  will  be  liable  to  be  sued  and  be  entitled 


AGENCY  491 

to  sue  thereon  in  all  cases,  unless  from  the  attendant  circumstances 
it  is  clearly  manifested  that  an  exclusive  credit  is  given  to  the  agent." 
There  is  a  clear  distinction  between  this  case  and  a  case  where 
a  party  seeks  to  hold  liable  an  undisclosed  principal  to  whom  he  has 
sold  goods  through  an  agent  and  who  has  actually  received  the  goods 
and  applied  them  to  his  own  use.  It  cannot  be  doubted  but  that  the 
party  to  a  contract  who  has  discovered  that  the  goods  were  sold  to 
an  undisclosed  principal  may  waive  his  right  to  refuse  to  recog- 
nize any  other  party  to  the  contract  than  the  person  with  whom  he  has 
contracted  and  insist  upon  holding  responsible  the  undisclosed  prin- 
cipal. But  an  entirely  different  question  is  presented  where  the 
party  to  the  contract  refuses  to  recognize  an  undisclosed  principal 
as  a  principal,  and  insists  upon  holding  the  party  with  whom  he  has 
contracted  as  the  real  party  to  the  contract.  The  proposition  is, 
that  a  party  to  a  contract  is  entitled  to  insist  that  the  parties  with 
whom  he  contracted  are  the  real  parties  who  will  perform  and  enforce 
the  contract,  and  he  is  not  bound  to  recognize  either  an  actual 
assignment  of  the  contract  or,  what  is  its  equivalent,  an  enforcement 
of  the  contract  by  an  undisclosed  principal  upon  the  ground  that 
the  contract  was  really  made  for  his  benefit. 

4.     Contract  Involving  Financial  Responsibility  of  Agent. 

Birmingham  Matinee  Club  v.  McCarty,  152  Ala.  57/. 

Agee,  President  of  the  Matinee  Club,  entered  into  a  written 
contract  to  sell  property  belonging  to  the  Club  to  the  defendant, 
McCarty,  and  to  give  him  a  warranty  deed.  Agee  was  at  this 
time  acting  as  an  agent  of  the  Club,  which  was  his  undisclosed 
principal.  McCarty  refused  to  accept  the  property,  and  the  Club 
sues  for  damages  for  the  breach  of  the  agreement. 

Held,  that  when  a  third  party  enters  into  a  contract  with  the 
agent  of  an  undisclosed  principal,  involving  the  financial  respon- 
sibility of  the  agent,  the  principal  cannot  sue  upon  it. 

McClellan,  J. 

The  vital  and  decisive  question  is,  may  an  undisclosed  principal 
enforce,  in  breach  of  performance,  a  contract  made  by  an  agent 
fully  authorized  thereunto,  in  his  own  name,  for  the  sale  to  and 
purchase  by  another  of  lands  of  the  principal  wherein  it  is  stipulated 
that  the  ostensible  seller  (the  agent  in  reality)  will  grant  by  war- 
ranty deed  an  unincumbered  title?  As  a  general  rule,  the  principal, 
though  undisclosed,  is  invested  by  the  authorized  act  of  the  agent, 
for  the  benefit  and  advantage  of  the  principal,  with  every  right 
and  burdened  with  every  liability  arising  out  of  or  pertaining  to 
the  contract  as  perfectly  as  if  the  principal  had,  in  his  own  name 
and  person,  made  the  contract.  But  this  rule  is  subject  to  an  impor- 
tant exception,  viz.,  that  if  the  contract  involves  elements  of  personal 


492  COMMERCIAL   LAW    CASES 

trust  and  confidence,  as  a  consideration  moving  from  the  agent  (of  the 
undisclosed  principal),  contracting  in  his  own  name,  to  the  other 
party  to  the  contract,  the  principal,  while  it  remains  executory,  can- 
not, against  the  resistance  of  the  other  party,  enforce  it,  either  to 
compel  performance  by  the  other  party  or  in  damages  for  a  breach. 
The  reason  for  this  exception  is  manifest.  If  the  party  contracting 
without  knowledge  of  the  agency  were  bound  to  take  the  service 
or  conveyance  of  property  from  the  undisclosed  principal,  the  well- 
recognized  rule  that  one  may  determine  for  himself  with  whom  he  will 
deal,  with  whom  he  will  contract,  would  be  directly  infracted ;  and 
the  elements  of  the  contract  reasonably  attributable  to  personal  con- 
fidence and  trust,  including  the  financial  responsibility  of  the  agent, 
with  whom  he  alone  deals  as  principal,  would  be  stricken  of  force 
to  which  under  all  principles  of  substantial  justice  and  right  the 
relying  party  is  entitled  to  the  benefit.  Of  course,  it  follows  that 
for  a  failure  or  refusal  by  the  party  dealing  with  the  agent  to  perform 
the  contract,  which  was  in  reality,  but  unknown  to  be,  the  undertak- 
ing of  an  undisclosed  principal,  and  not  the  undertaking  of  the 
individual  with  whom  made,  the  recalcitrant  party  cannot  be  mulcted 
in  damages  by  the  developed  principal. 

Applying  this  principal  to  tke  case  at  bar,  the  appellant  is  with- 
out right  to  and  cannot  recover;  and  the  judgment  to  that  effect 
was  well  rendered. 

5.     Right  of  Third  Party  to  Withdraw  from  Executory  Con- 
tract. 

Pancoast  v.  Dinsmore.  105  Me.  471. 

Mrs.  Pancoast  agreed  to  buy  a  farm  which  Dinsmore,  as  agent 
for  Hilton,  agreed  to  sell  to  her.  Hilton  was  himself  acting  as 
agent  for  the  real  owner,  Mrs.  Coughlan.  Mrs.  Pancoast  paid  $400 
on  the  purchase  price  to  Dinsmore,  which  she  now  seeks  to  recover 
without  performing  the  contract. 

Held,  that  when  a  contract  is  entirely  executory,  a  person  who 
has  had  dealings  with  an  agent  for  an  undisclosed  principal,  be- 
lieving him  to  be  the  real  principal,  is  entitled  to  withdraw. 

Savage,  J. 

The  position  of  the  defendant  is  that  the  real  owner,  a  Mrs. 
Coughlan,  was  an  undisclosed  principal,  of  whom  Hilton  was  the 
agent,  and  that  a  tender  of  a  deed  by  Mrs.  Coughlan  was  as  effectual 
to  hold  the  plaintiff,  as  would  have  been  a  tender  of  a  deed  by  Hilton, 
had  the  title  been  in  him.  But  this  conclusion  does  not  follow.  The 
plaintiff's  contract  was  with  Hilton  as  a  principal.  She  contracted 
with  no  one  else.  Doubtless,  if  the  owner  had  placed  the  title  in 
Hilton  for  sale  as  agent,  and  he  had  performed  his  contract  by  the 
execution  and  delivery  of  a  deed,  by  the  principles  of  the  law  of 


AGENCY  493 

agency,  the  undisclosed  owner  might  have  held  the  plaintiff  for  the 
price.  Doubtless,  too,  the  plaintiff  might  have  held  the  owner,  as 
undisclosed  principal,  to  the  performance  of  the  contract  made  by 
her  agent.  This  rule  is  well  settled.  But  this  case  does  not  fall 
within  these  rules.  Here  the  defendant,  instead  of  seeking  to  bind 
an  undisclosed  principal  to  a  third  party  who  contracted  with  the 
agent,  seeks  to  bind  a  third  party  to  an  undisclosed  principal,  in  the 
case  of  an  unperformed  contract. 

It  is  good  sense,  as  well  as  sound  law,  that  in  case  of  a  purely  ex- 
ecutory contract,  a  party  dealing  with  another  as  principal,  though  in 
fact  he  is  agent,  is  not  compellable,  at  all  events,  to  accept  performance 
from  the  undisclosed  principal,  when  discovered,  though  he  may  do  so. 
He  may  well  say :  "This  is  not  the  contract  I  made."  In  case  an 
agent,  in  making  a  contract  with  a  third  party,  acts  in  his  own  name, 
and  does  not  disclose  the  name  of  his  principal,  or  the  existence  of 
an  agency,  the  agent  becomes,  as  to  that  third  party,  the  contracting 
party.  And  the  third  party  may  stand  on  the  contract  which  he 
has  made.  "A  party  has  a  right  to  select  and  determine  with  whom 
he  will  contract,  and  cannot  have  another  person  thrust  upon  him 
without  his  consent.  It  may  be  of  importance  to  him  who  performs 
the  contract;  he  may  contract  with  whom  he  pleases,  and  the  suf- 
ficiency of  his  reasons  for  so  doing  cannot  be  inquired  into."  And 
were  such  reasons  open  to  inquiry,  it  is  easy  to  see  that  one  might 
be  willing  to  take  the  warranties  of  one  person  in  a  deed,  when  he 
would  not  take  those  of  another.  At  any  rate,  he  is  only  obliged  to 
take  the  deed  which  he  contracted  to  take.  It  follows  that  the  plain- 
tiff was  not  bound  in  law  to  accept  Mrs.  Coughlan's  deed,  when 
tendered. 


IV. 

TERMINATION  OF  AGENCY. 

Termination  of  agency  may  be  brought  about: 

1.  By  fulfilment  of  the  contract  or  by  agreement.  Termina- 
tion in  this  manner  occurs  when  the  purposes  of  the  agency  have 
been  fulfilled,  or  when  the  time  of  its  duration  has  elapsed. 

2.  By  operation  of  law.  The  agency  is  destroyed  by  opera- 
tion of  law  when  the  subject  matter  changes  or  is  destroyed ;  when 
it  becomes  illegal ;  or  when  the  parties  become  incompetent  by 
death,  bankruptcy  or  insanity. 

3.  By  revocation.  The  principal  may  ordinarily  revoke  the 
agency,  or  the  agent  renounce  it  at  will.  This  is  true  even  though 
the  revocation  operates  as  a  breach  of  the  contract  for  which 
damages  may  be  recovered.  Only  in  the  following  cases  is  agency 
irrevocable : 


494  COMMERCIAL   LAW    CASES 

a.  When  the  agent  has  a  power  coupled  with  an  interest.     In 

order  that  this  exception  shall  exist,  the  agent  must  have 
an  interest  in  the  thing  itself  which  constitutes  the  subject 
matter  of  the  agency,  as  distinguished  from  a  mere  interest 
in  the  success  of  the  agency. 

b.  When  the  agent  has  a  power  coupled  with  a  duty  to  a  third 

person.  If  the  agent  has  incurred  a  personal  obligation 
to  a  third  person  on  account  of  his  agency,  it  may  not  be 
revoked  until  the  agent  is  protected  against  loss  or  damage 
arising  from  that  obligation. 

I.     Accomplishment  of  Purpose. 

Rowe,  Trustee  v.  Rand,  Receiver.  ,iii  Ind.  206. 

Rowe  was  appointed  receiver  to  take  charge  of  the  business  of 
a  company  which  was  indebted  to  the  First  National  Bank  of 
Indianapolis,  and  to  the  Indiana  Banking  Company.  He  deposited 
the  money  he  received  with  the  Banking  Company,  under  the  name 
of  William  Rowe,  Trustee.  Subsequently,  these  two  banks  and 
the  National  Bank's  successor  entered  iiito  an  adjustment  of 
accounts  between  themselves  and  each  signed  a  release  to  the  other 
under  which  a  settlement  of  all  rights  between  them  was  effected. 
Rowe  seeks  to  establish  his  right  to  the  money  deposited  as  trustee 
in  an  action  against  Rand,  the  receiver  of  the  Banking  Company, 
who  contends  that  Rowe's  authority  as  agent  ceased  when  the 
two  principals  adjusted  their  respective  rights  against  each  other 
by  mutual  releases. 

Held,  that  the  agency  was  accomplished  by  the  signing  of  the 
releases,  and  that  Rowe's  interest  in  the  fund  thereby  ceased. 

Niblack,  J. 

A  trustee  is  one  to  whom  an  estate  has  been  conveyed  in  trust, 
and,  consequently,  the  holding-  of  property  in  trust  constitutes  a 
person  a  trustee.  An  agent  is  one  who  acts  for,  or  in  place  of, 
another,  denominated  the  principal,  in  virtue  of  power  or  authority 
conferred  by  the  latter,  to  whom  an  account  must  be  rendered.  In 
the  case  of  an  ordinary  agency  for  the  sale  or  distribution  of  property, 
the  title  to  tlie  property,  as  well  as  to  the  proceeds,  remains  in  the 
principal.  Such  an  agency  may  be  revoked  at  any  time,  in  the  dis- 
cretion of  the  principal.  It  may,  also,  be  in  like  manner  terminated 
by  the  renunciation  of  the  agent,  he  being  liable  only  for  the  dam- 
ages whicli  may  result  to  the  principal.  An  agency  may  also  be, 
and  is,  revoked  by  operation  of  law  in  certain  cases,  among  which  are 
the  bankruptcy  of  the  principal,  the  extinction  of  the  subject  matter 
of  the  agency,  the  loss  of  tlie  principal's  power  over  such  subject 
matter,  or  the  complete  execution  of  the  business  for  which  the 
agency  was  created;  also,  where  the  changed  condition  becomes  such 


AGENCY  495 

as  to  produce  an  incapacity  in  either  party  to  proceed  with  the 
business  of  the  agency.  Where  a  power  or  authority  to  act  as 
agents  is  conferred  on  two  persons,  the  death  of  one  of  them  ter- 
minates the  agency.  So,  where  two  persons  are  jointly  appointed 
agents  to  take  charge  of  a  particular  business  for  a  specified  term 
or  purpose,  and  one  of  them  becomes  incapacitated  before  the  term 
is  completed  or  the  purpose  is  accomplished,  the  other  can  not  pro- 
ceed alone  without  the  consent  of  the  principal,  and  hence  the  agency 
is  thereby  in  effect  revoked. 

The  inevitable  inference  from  these  legal  propositions  is  that 
when  two  principals  jointly  appoint  an  agent  to  take  charge  of  some 
matter  in  which  they  are  jointly  interested,  and  a  severance  of  their 
joint  interest  afterwards  occurs,  the  severance  revokes  the  agency. 

An  agent  may  sue  in  his  own  name :  First,  When  the  contract 
is  in  writing,  and  is  expressly  made  with  him,  although  he  may  have 
been  known  to  act  as  agent.  Secondly.  When  the  agent  is  the  only 
known  or  ostensible  principal,  and  is,  therefore,  in  contemplation 
of  law,  the  real  contracting  party.  Thirdly.  When,  by  the  usage 
of  trade,  he  is  authorized  to  act  as  owner,  or  as  a  principal  con- 
tracting party,  notwithstanding  his  well  known  position  as  agent 
only.  But  this  right  of  an  agent  to  bring  an  action,  in  certain  cases, 
in  his  own  name  is  subordinate  to  the  rights  of  the  principal,  who 
may,  unless  in  particular  cases,  where  the  agent  has  a  lien  or  some 
other  vested  right,  bring  suit  himself,  and  thus  suspend  or  extinguish 
the  right  of  the  agent. 

Applying  the  general  principles  thus  announced  to  the  facts 
herein  above  stated,  our  conclusions  are,  that  Rowe  became  an  agent 
only,  and  hence  not  a  trustee,  for  the  sale  of  the  property  left  with 
him  by  the  banks;  that  he  acquired  no  lien  either  upon  the  property 
or  its  proceeds  which  would  have  prevented  the  national  banks, 
or  either  one  of  them,  as  the  situation  might  have  authorized  at  the 
time,  from  revoking  Rowe's  authority  as  their  agent,  and  demanding 
an  accounting  from  the  banking  company  as  to  the  money  deposited 
with  it  by  him,  or  from  demanding  such  an  accounting  without  re- 
voking Rowe's  agency;  that  consequently,  the  money  so  deposited 
constituted  a  fund  upon  which  the  national  banks  might  have  based 
a  claim  against  the  banking  company  when  the  agreement  was 
mutually  entered  into  on  the  loth  day  of  August,  1883,  and  that, 
if,  in  fact,  all  claim  against  that  fund  was  released  by  the  agree- 
ment of  that  date,  the  agency  of  Rowe  in  all  matters  concerning  the 
fund  was  thereby  revoked,  leaving  him  in  a  position  to  demand  only 
an  accounting  for  his  services  and  expenses. 

2.     Change  in  Subject  Matter. 

Cox  V.  Bozvling.  54  Mo.  App.  28g. 

Bowling  authorized  Cox  to  procure  some  one  to  purchase  his 
house  and  lot  for  $2,500.    After  the  house  was  destroyed  by  fire, 


496  COMMERCIAL   LAW    CASES 

Bowling  effected  a  sale  of  the  land  for  $2,000  to  Snyder,  with 
whom  Cox  had  been  in  negotiation  before  the  fire.  Cox  now  sues 
for  the  value  of  his  services. 

Held,  that  when  the  subject  matter  changes,  the  agency  is 
terminated. 

Gill,  J. 

Plaintiff  did  not  secure  a  purchaser  for  the  house  and  lot  he 
engaged  to  sell.  Snyder  and  Bowling  were  never  able  to  agree  on 
a  price  for  the  property  as  it  stood  when  Cox  conducted  the  nego- 
tiations. Bowling's  price — and  that,  too,  at  which  Cox  undertook 
to  sell — was  $2500,  but  Snyder  was  not  willing  to  pay  that  for  the 
property.  Subsequently,  however,  when  the  building  was  destroyed 
and  the  property  became  materially  changed  (so  that  indeed  it  was 
not  the  same  as  when  Cox  was  employed  to  sell  it),  Bowling  and 
Snyder  came  together  and  a  sale  of  the  vacant  lot  was  effected.  But 
this  was  not  the  property  that  Cox  was  empowered  to  sell.  There 
was  nothing  said  between  Bowling  and  Cox  after  the  destruction 
of  the  building.  So  material  a  change  in  the  subject  matter  of  the 
agency  amounted  to  a  revocation  of  Cox's  authority  as  agent.  It 
is  well  settled  that  the  authority  of  the  agent  is  determined  by  the 
destruction  of  the  subject  matter  of  the  agency. 

3.     Provision  against  Termination  by  Change  in  Subject  Mat- 
ter. 

Turner  v.  Goldsmith.  (iSp.i)  i  Q.  B.  (Eng.)  544. 

Goldsmith,  a  shirt  manufacturer,  agreed  to  employ  Turner  as 
a  traveling  salesman  for  the  term  of  five  years  to  sell  goods  as 
Goldsmith  should  forward  samples.  About  two  years  thereafter. 
Goldsmith's  factory  burned  down,  and  he  refused  to  continue  the 
employment  of  Turner.    Turner  sues  for  breach  of  contract. 

Held,  that  while  a  change  in  the  subject  matter  ordinarily 
terminates  an  agency,  the  contract  may  by  its  terms  negative  this 
assumption. 

Lindley,  L.  J. 

The  company  would  not  be  employing  the  plaintiff  within  the 
meaning  of  the  agreement  unless  they  supplied  him  with  samples  to 
a  reasonable  extent.  On  the  face  of  the  agreement,  there  is  no 
reference  to  the  place  of  business,  and  no  condition  as  to  the  defend- 
ant's continuing  to  manufacture  or  sell. 

There  seems  no  doubt  that  where  there  is  a  positive  contract 
to  do  a  thing  not  in  itself  unlawful,  the  contractor  must  perform 
it  or  pay  damages  for  not  doing  it  although  in  consequence  of  un- 
foreseen accidents  the  performance  of  his  contract  has  become  unex- 
pectedly   burdensome    or    even    impossible.      But    this    rule    is    only 


AGENCY  497 

applicable  when  the  contract  is  positive  and  absolute,  and  not  sub- 
ject to  any  condition  either  express  or  implied,  and  there  are  authori- 
ties which  we  think  establish  the  principle  that  where,  from  the 
nature  of  the  contract,  it  appears  that  the  parties  must  from  the  be- 
ginning have  known  that  it  could  not  be  fulfilled,  unless  when  the 
time  for  the  fulfilment  of  the  contract  arrived  some  particular  speci- 
fied thing  continued  to  exist,  so  that  when  entering  into  the  con- 
tract they  must  have  contemplated  such  continuing  existence  as  the 
foundation  of  what  was  to  be  done,  then,  in  the  absence  of  any 
express  or  implied  warranty  that  the  thing  shall  exist,  the  contract  is 
not  to  be  construed  as  a  positive  contract,  but  as  subject  to  an  im- 
plied condition  that  the  parties  shall  be  excused  in  case  before 
breach  performance  becomes  impossible  from  the  perishing  of  the 
thing  without  default  of  the  contractor.  The  substance  is  that  the 
contract  will  be  treated  as  subject  to  an  implied  condition  that  it  is 
to  be  in  force  only  so  long  as  a  certain  state  of  things  continues, 
in  those  cases  only  where  the  parties  must  have  contemplated  the 
continuing  of  that  state  of  things  as  the  foundation  of  what  was 
to  be  done.  Here  the  parties  cannot  be  taken  to  have  contemplated 
the  continuance  of  the  defendant's  manufactory  as  the  foundation 
of  what  was  to  be  done;  for,  the  plaintiff's  employment  was  not  con- 
fined to  articles  manufactured  by  the  defendant.  The  action  there- 
fore, in  my  opinion,  is  maintainable. 

Kay,  L.  J. 

There  is  no  proof  that  it  is  impossible  for  the  defendant  to  carry 
on  business  in  articles  of  the  nature  mentioned  in  the  agreement. 
If  it  had  been  proved  that  the  defendant's  power  to  carry  on  busi- 
ness had  been  taken  away  by  something  for  which  he  was  not  re- 
sponsible, I  should  say  that  there  was  no  breach  of  the  agreement, 
but  here  it  was  not  taken  away. 

4.     Death  of  Principal. 

Weber  v.  Bridgman.   113  N.  Y.  600. 

Weber  gave  Hart  wig  a  power  of  attorney  authorizing  him  to 
discharge  a  mortgage.  Hartwig  discharged  the  mortgage,  took 
the  money  for  it,  and  absconded  after  learning  that  Weber  was 
dead.  This  discharge  was  given  to  Bridgman,  who  had  acquired 
title  to  the  premises  and  who  paid  the  mortgage.  Mrs.  Weber, 
as  administratrix  of  Weber's  estate,  sues  to  foreclose  the  mort- 
gage as  an  existing  lien  on  the  property. 

Held,  that  death  revokes  an  agency. 

Danforth,  J. 

The  question  is  not  new,  and  it  has  been  uniformly  answered 
by  our  decisions  to  the  effect  that  the  death  of  the  principal  puts 


498  COMMERCIAL   LAW    CASES 

an  end  to  the  agency,  and,  therefore,  is  an  instantaneous  and  un- 
quaHfied  revocation  of  the  authority  of  the  agent.  There  can  be 
no  agent  where  there  is  no  principal.  There  are,  no  doubt,  excep- 
tions to  the  rule,  as  where  the  agency  is  coupled  with  an  interest,  or 
where  the  principal  was  a  firm  and  only  one  of  its  members  died. 
But  both  cases  recognize  the  general  rule  to  be  as  above  stated. 
It  is  quite  unnecessary  to  go  through  the  cases  on  this  subject.  The 
rule  at  common  law  which  determines  the  authority  of  an  agent  by 
the  death  of  his  principal  is  well  settled,  and  no  notice  is  necessary 
to  relieve  the  estate  of  the  principal  of  responsibility,  even  on  con- 
tracts into  which  the  agent  had  entered  with  third  persons  who 
were  ignorant  of  his  death.  Those  who  deal  with  an  agent  are  held 
to  assume  the  risk  that  his  authority  may  be  terminated  by  death 
without  notice  to  them.  This  rule  was  established  in  England  al- 
though now  modified  by  statute,  and  is  generally  applied  in  this 
country. 

5.     Insanity  of  Principal. 

Drew  V.  Nunn,  L.  R.  4  Q.  B.  D.  (Eng.)  661. 

Drew  sold  shoes  to  the  wife  of  Nunn.  Nunn  had  given  his 
wife  authority  to  buy  goods  on  credit,  but  he  later  became  insane. 
During  his  insanity  his  wife  continued  to  buy  from  Drew,  who  did 
not  know  that  Nunn  was  insane. 

Held,  that  while  insanity  terminates  an  agency,  ostensible 
authority  given  before  insanity  may  still  be  relied  upon. 

Brett,  L.  J. 

Upon  this  state  of  facts  two  questions  arise.  Does  insanity  put 
an  end  to  the  authority  of  the  agent?  One  would  expect  to  find 
that  this  question  has  been  long  decided  on  clear  principles;  but  I 
find  that  no  satisfactory  conclusion  has  been  arrived  at.  If  such 
insanity  as  existed  here  did  not  put  an  end  to  the  agent's  authority, 
it  would  be  clear  that  the  plaintiff  is  entitled  to  succeed;  but  in  my 
opinion  insanity  of  this  kind  does  put  an  end  to  the  agent's  authority. 
It  cannot  be  disi)uted  that  some  cases  of  change  of  status  in  the  prin- 
cipal put  an  end  to  the  authority  of  the  agent;  thus,  the  bankruptcy 
and  death  of  the  principal,  the  marriage  of  a  female  principal,  all 
put  an  end  to  the  authority  of  the  agent.  It  may  be  argued  that  this 
result  follows  from  the  circumstance  that  a  different  principal  is  cre- 
ated. Upon  bankruptcy  the  trustee  becomes  the  principal;  upon 
death  the  heir  or  devisee  as  to  realty,  the  executor  or  administrator 
as  to  personalty ;  and  upon  the  marriage  of  a  female  principal  her 
husband  takes  her  place.  And  it  has  been  argued  that  by  analogy 
the  lunatic  continues  liable  until  a  fresh  principal,  namely,  his  com- 
mittee, is  ajjpointcd.  I'ut  I  cannot  think  tliat  this  is  the  true  ground, 
for  executors  are,   at   least   in   some   instances,  bound  to  carry  out 


AGENCY  499 

the  contracts  entered  into  by  their  testators.  I  think  that  the  satis- 
factory principle  to  be  adopted  is  that,  where  such  a  change  occurs 
as  to  the  principal  that  he  can  no  longer  act  for  himself,  the  agent 
whom  he  has  appointed  can  no  longer  act  for  him.  In  the  present 
case  a  great  change  had  occurred  in  the  condition  of  the  principal: 
he  was  so  far  afflicted  with  insanity  as  to  be  disabled  from  acting 
for  himself;  therefore  his  wife,  who  was  his  agent,  could  no  longer 
act  for  him.  Upon  the  ground  which  I  have  pointed  out,  I  think 
that  her  authority  was  terminated.  It  seems  to  me  that  an  agent  is 
liable  to  be  sued  by  a  third  person,  if  he  assumes  to  act  on  his  prin- 
cipal's behalf  after  he  had  knowledge  of  his  principal's  incompe- 
tency to  act. 

The  second  question  then  arises,  What  is  the  consequence  where 
a  principal,  who  has  held  out  another  as  his  agent,  subsequently  be- 
comes insane,  and  a  third  person  deals  with  the  agent  without  notice 
that  the  principal  is  a  lunatic?  Authority  may  be  given  to  an  agent 
in  two  ways.  First,  it  may  be  given  by  some  instrument,  which  of 
itself  asserts  that  the  authority  is  thereby  created,  such  as  a  power 
of  attorney;  it  is  of  itself  an  assertion  by  the  principal  that  the  agent 
may  act  for  him.  Secondly,  an  authority  may  also  be  created 
from  the  principal  holding  out  the  agent  as  entitled  to  act  generally 
for  him.  The  agency  in  the  present  case  was  created  in  the  manner 
last  mentioned  as  between  the  defendant  and  his  wife,  the  agency 
expired  upon  his  becoming  to  her  knowledge  insane;  but  it  seems  to 
me  that  the  person  dealing  with  the  agent  without  knowledge  of  the 
principal's  insanity  has  a  right  to  enter  into  a  contract  with  him, 
and  the  principal,  although  a  lunatic,  is  bound  so  that  he  cannot 
repudiate  the  contract  assumed  to  be  made  upon  his  behalf.  It  is 
difficult  to  assign  the  ground  upon  which  this  doctrine,  which  however 
seems  to  me  to  be  the  true  principle,  exists.  It  is  said  that  the  right  to 
hold  the  insane  principal  liable  depends  upon  contract.  I  have  a 
difficulty  in  assenting  to  this.  It  has  been  said  also  that  the  right 
depends  upon  estoppel.  I  cannot  see  that  an  estoppel  is  created.  But 
it  has  been  said  also  that  the  right  depends  upon  representations 
made  by  the  principal  and  entitling  third  persons  to  act  upon  them, 
until  they  hear  that  those  representations  are  withdrawn.  The  au- 
thorities seem  to  base  the  right  upon  the  ground  of  public  policy : 
it  is  said  in  effect  that  the  existence  of  the  right  goes  in  aid  of 
public  business.  It  is,  however,  a  better  way  of  stating  the  rule 
to  say  that  the  holding  out  of  another  person  as  agent  is  a  representa- 
tion upon  which,  at  the  time  when  it  was  made,  third  parties  had  a 
right  to  act,  and  if  no  insanity  had  supervened  would  still 
have  had  a  right  to  act.  In  this  case  the  wife  was  held  out  as  agent, 
and  the  plaintiff  acted  upon  the  defendant's  representation  as  to  her 
authority  without  notice  that  it  had  been  withdrawn.  The  defendant 
cannot  escape  from  the  consequences  of  the  representation  which  he 
has  made;  he  cannot  withdraw  the  agent's  authority  as  to  third 
persons  without  giving  them  notice  of  the  withdrawal.  The  prin- 
cipal is  bound  although  he  retracts  the  agent's  authority,  if  he  has  not 


500  COMMERCIAL   LAW    CASES 

given  notice  and  the  latter  wrongfully  enters  into  a  contract  upon 
his  behalf.  The  defendant  became  insane  and  was  unable  to  with- 
draw the  authority  which  he  had  conferred  upon  his  wife;  he  may 
be  an  innocent  sufferer  by  her  conduct,  but  the  plaintifif,  who  dealt 
with  her  bona  fide,  is  also  innocent,  and  where  one  of  two  persons 
both  innocent  must  suffer  by  the  wrongful  act  of  a  third  person, 
that  person  making  the  representation  which,  as  between  the  two, 
was  the  original  cause  of  the  mischief,  must  be  the  sufferer  and 
must  bear  the  loss.  Here  it  does  not  lie  in  the  defendant's  mouth 
to  say  that  the  plaintiff  shall  be  the  sufferer, 

A  difficulty  may  arise  in  the  application  of  a  general  principle 
such  as  this  is.  Suppose  that  a  person  makes  a  representation  which 
after  his  death  is  acted  upon  by  another  in  ignorance  that  his  death 
has  happened :  in  my  view  the  estate  of  the  deceased  will  be  bound  to 
make  good  any  loss,  which  may  have  occurred  through  acting  upon 
that  representation. 

6.     Revocation  of  Agency. 

Cloe  V.  Rogers.  31  Okla.  255. 

Rogers  gave  Cloe  an  irrevocable  agency,  for  a  period  of  two 
years,  to  lay  out  and  sell  certain  lots  of  land  for  him.  Cloe  opened 
an  office,  lifted  the  lots,  and  did  work  with  a  view  to  selling  them, 
when  Rogers  withdrew  his  authority.  Cloe  sues  him  for  breach 
of  agreement. 

Held,  that  although  a  contract  in  its  terms  specifies  that  it  is 
irrevocable,  it  may  be  revoked  upon  payment  of  damages. 

Dunn,  J. 

It  must  be  conceded  that,  before  plaintiff  acted,  the  contract 
was  merely  a  proffer  on  the  part  of  the  defendant,  and,  so  far  as  the 
same  remained  unacted  on  by  plaintiff,  was  subject  to  revocation;  that 
it  was  an  offer  to  appoint  plaintiff  an  agent,  uncoupled  with  any 
interest  whatsoever  in  plaintiff;  and  that,  had  revocation  been 
made  prior  to  any  act  on  the  part  of  plaintiff,  defendant  had  the 
power  and  the  right  to  revoke.  .The  question  involved,  however, 
it  being  undisputed  that  plaintiff  accepted  the  proffer,  opened  an 
office  at  Grove,  placed  therein  an  agent,  incurred  considerable  ex- 
pense, and  spent  several  months  pursuing  the  business  under  the 
contract,  is:  Does  this  alter  the  relationship  between  the  parties, 
and  docs  it  have  the  effect  of  giving  to  the  plaintiff  an  actual, 
valuable  interest  in  the  contract,  and  supply  the  want  of  consideration 
and  mutuality  which  existed  prior  thereto?  In  answer,  we  may 
say  the  general  rule  seems  to  be  that,  where  an  agency  is  uncoupled 
with  an  interest,  it  may  be  revoked  by  the  principal  at  will,  without 
liability  for  damages;  l)ut  where  it  is  for  a  fixed  time,  and  contem- 
plates on  the  part  of  the  agent  the  expenditure  of  time  and  money 


AGENCY  501 

to  carry  it  out,  and  is  accepted  and  the  duties  imposed  are  entered 
upon  by  the  agent,  and  money  and  time  are  expended  in  pursuance 
of  the  object  of  the  agency,  that,  although  the  principal  has  the 
power  to  revoke  and  bring  to  a  termination  the  contract,  yet  he 
lacks  the  right  of  so  doing,  except  upon  the  burden  of  responding 
to  the  agent  for  such  damages  as  he  may  suffer  by  reason  thereof. 

Where  the  authority  is  not  coupled  with  an  interest,  the  principal 
has  power  to  revoke  at  his  will  at  any  time.  But  this  power  to  revoke 
is  not  to  be  confounded  with  the  right  to  revoke.  Much  uncertainty 
has  crept  into  the  text-books  and  decisions  from  a  failure  to  dis- 
criminate clearly  between  them.  Except  in  those  cases  where  the 
authority  is  coupled  with  an  interest,  the  law  compels  no  man  to 
employ  another  against  his  will.  The  relation  of  agent  to  his  prin- 
cipal is  rounded,  in  greater  or  less  degree,  upon  trust  and  confidence. 
It  is  essentially  a  personal  relation.  It  is  the  rule  of  law  that  con- 
tracts of  agency,  like  those  creating  other  personal  relations,  will 
not  be  specifically  enforced.  Nor  does  it  make  any  difiference  in  this 
view  that  the  principal  has  expressly  agreed  that  he  will  continue 
to  confide  in  the  agent  for  a  definite  period.  It  is  no  less  difficult 
on  that  account,  to  coerce  compliance.  The  law,  therefore,  leaves 
the  principal  in  such  cases  to  determine  for  himself  how  long  the 
relation  shall  continue.  This,  then,  is  what  is  meant  when  it  is 
said  that  the  principal  may  revoke  the  authority  at  any  time.  But 
it  by  no  means  follows  that,  though  possessing  this  power,  the  prin- 
cipal has  a  right  to  exercise  it  without  liability,  regardless  of  his 
contract  in  the  matter.  It  is  entirely  consistent  with  the  existence 
of  the  power  that  the  principal  may  agree  that  for  a  definite  period 
he  will  not  exercise  it,  and  for  the  violation  of  such  agreement  the 
principal  is  as  much  liable  as  for  the  breach  of  any  contract.  It 
is  in  this  view,  therefore,  that  the  question  of  the  right  to  revoke 
arises.  When  the  right  to  revoke  exists — when  no  express  or  implied 
agreement  exists  that  the  agent  shall  be  retained  for  a  definite  time, 
the  power  and  the  right  of  revocation  coincide — such  employments 
are  deemed  to  be  at  will  merely,  and  may  be  terminated  at  any  time 
by  either  party,  without  violating  contract  obligations  or  incurring 
liability.  The  law  presumes  that  all  general  employments  are  thus 
at  will  merely,  and  the  burden  of  proving  employment  for  a  definite 
time  rests  upon  him  who  alleges  it. 

7.    Irrevocable  Agency:   Power  Coupled  with  Interest. 

Hunt  V.  Rousmanier's  Administrators.  8  Wheat.  (U.  S.)  1^4. 

Rousmanier  borrowed  money  from  Hunt,  giving  him  as 
security  an  irrevocable  power  of  attorney  authorizing  him  to  sell 
certain  vessels  belonging  to  Rousmanier  upon  failure  to  pay  the 
amount  due.  Rousmanier  died  insolvent  without  having  paid  the 
notes,  and  Hunt  offered  Rousmanier's  interest  in  the  vessels  for 


502  COMMERCIAL   LAW    CASES 

sale.    This  bill  is  brought  to  force  Rousmanier's  representatives 
to  assent  to  the  sale. 

Held,  that  when  an  agency  is  coupled  with  an  interest,  it  is 
irrevocable. 

Marshall,  C.  J. 

The  general  rule,  that  a  power  ceases  with  the  life  of  the  person 
giving  it,  admits  of  one  exception.  If  a  power  be  coupled  with  an 
"interest,"  it  survives  the  person  giving  it,  and  may  be  executed 
after  his  death. 

As  this  proposition  is  laid  down  too  positively  in  the  books  to 
be  controverted,  it  becomes  necessary  to  inquire  what  is  meant  by  the 
expression,  a  power  coupled  with  an  interest?  Is  it  an  interest  in  the 
subject  on  which  the  power  is  to  be  exercised,  or  is  it  an  interest 
in  that  which  is  produced  by  the  exercise  of  the  power?  We  hold 
it  to  be  clear  that  the  interest  which  can  protect  a  power  after  the 
death  of  a  person  who  creates  it,  must  be  an  interest  in  the  thing 
itself.  In  other  words,  the  power  must  be  ingrafted  on  an  estate 
in  the  thing. 

The  words  themselves  would  seem  to  import  this  meaning.  "A 
power  coupled  with  an  interest,"  is  a  power  which  accompanies, 
or  is  connected  with,  an  interest.  The  power  and  the  interest  are 
united  in  the  same  person.  But  if  we  are  to  understand  by  the  word 
"interest,"  an  interest  in  that  which  is  to  be  produced  by  the  exer- 
cise of  the  power,  then  they  are  never  united.  The  power,  to 
produce  the  interest,  must  be  exercised,  and  by  its  exercise,  is  ex- 
tinguished. The  power  ceases  when  the  interest  commences  and, 
therefore,  cannot,  in  accurate  law  language,  be  said  to  be  "coupled" 
with  it. 

But  the  substantial  basis  of  the  opinion  of  the  court  on  this 
point,  is  found  in  the  legal  reason  of  the  principle.  The  interest  or 
title  in  the  thing  being  created  in  the  person  who  gives  the  power, 
remains  in  him,  unless  it  be  conveyed  with  the  power,  and  can  pass 
out  of  him  only  by  a  regular  act  in  his  own  name.  The  act  of  the 
substitute,  therefore,  which,  in  such  a  case,  is  the  act  of  the  principal, 
to  be  legally  effectual,  must  be  in  his  name,  must  be  such  an  act  as 
the  principal  himself  would  be  capable  of  performing,  and  which 
would  be  valid  if  performed  by  him.  Such  a  power  necessarily 
ceases  with  the  life  of  the  person  making  it.  But  if  the  interest, 
or  estate,  passes  with  the  power,  and  vests  in  the  person  by  whom 
the  power  is  to  be  exercised,  such  person  acts  in  his  own  name. 
The  estate,  being  in  him,  passes  from  him  by  a  conveyance  in  his 
own  name.  He  is  no  longer  a  substitute,  acting  in  the  place  and  name 
of  another,  but  is  a  principal  acting  in  his  own  name,  in  pursuance 
of  powers  which  limit  his  estate.  The  legal  reason  which  limits  a 
power  to  the  life  of  the  person  giving  it,  exists  no  longer,  and  the 
rule  ceases  with  tlie  reason  on  whicli  it  is  founded.  The  intention  of 
the  instrument  may  be  effected  without  violating  any  legal  principle. 


AGENCY  503 

8.     Irrevocable  Agency:    Power  Coupled  with  Duty. 

Hess  V.  Ran.  95  N.  Y.  559. 

The  plaintiffs,  stock  brokers,  sold  stock  short  for  Rau,  and 
borrowed  the  stock  to  make  delivery  for  him.  While  the  trans- 
action was  pending,  Rau  died  and  the  plaintiffs  continued  to  pro- 
tect the  account.  After  the  defendant  had  been  appointed  admin- 
istratrix of  the  estate,  the  plaintiffs  required  additional  margin 
which  was  not  forthcoming ;  they  thereupon  bought  in  the  stock 
and  charged  Rau's  estate.  They  now  seek  to  recover  the  losses 
thereby  incurred.  The  defense  is  that  the  plaintiff's  agency  was 
revoked  by  the  death  of  Rau  and  that  the  plaintiffs  should  have 
covered  the  stock  immediately  upon  learning  of  his  death. 

Held,  that  when  an  agency  is  coupled  with  an  obligation  to  a 
third  person,  death  does  not  revoke  the  agency. 

Andrezvs,  J. 

It  is  unnecessary  to  explain  the  nature  of  a  short  sale  of  stock, 
or  to  restate  the  practical  methods  adopted  to  accomplish  the  pur- 
pose of  the  seller  who  usually  has  nothing  to  sell,  but  wants  to 
realize  a  profit  by  selling  something  he  has  not  got  at  the  price  of 
to-day,  and  buying  it  in  at  a  lower  price  to-morrow.  It  is  sufficient 
for  the  present  purpose  to  say  that  the  broker  employed  in  the 
transaction  borrows  the  stock  to  make  delivery  on  his  own  account 
as  between  himself  and  the  lender,  and  repeats  the  process  of  borrow- 
ing so  long  as  the  transaction  with  his  customer  is  open  and  as  the 
exigency  requires.  The  broker  and  the  customer  have  mutual  and 
correlative  rights  and  duties.  The  former  undertakes  to  carry  the 
stock  a  reasonable  time  so  as  to  afford  the  customer  an  opportunity 
to  realize  the  expected  profits,  while  the  customer  on  his  part  is 
bound  to  keep  his  margin  good  so  as  to  secure  the  broker  against 
loss.  But  the  customer  is  entitled  to  notice  before  the  broker  can 
close  him  out  by  buying  in  the  stock  on  his  account. 

It  is  clear  that  after  the  death  of  Rau,  the  plaintiffs  could  not 
enter  into  fresh  transactions  in  the  purchase  or  sale  of  stocks  on 
account  of  Rau  or  his  estate,  in  execution  of  unexecuted  orders  or  a 
general  authority  to  deal  in  stocks  for  his  account  given  before  his 
death.  But  the  rule  that  the  death  of  a  principal  revokes  the  author- 
ity of  an  agent  has  a  well-settled  exception  when  the  agency  is 
coupled  with  an  interest.  The  death  of  Rau  left  the  plaintiffs  in 
the  position  they  had  previously  occupied,  of  being  borrowers  of 
the  stocks  to  deliver,  with  a  personal  liability  to  replace  them  when 
called  for  by  the  lenders.  This  obligation  was  not  and  could  not  be 
terminated  by  Rau's  death.  The  estate  of  Rau  on  the  other  hand 
was  bound  to  indemnify  the  plaintiffs  for  any  loss  they  might  sus- 
tain on  closing  out  the  transactions,  or  as  the  phrase  is,  "covering 
the  sale." 


504  COMMERCIAL   LAW    CASES 

Until  the  appointment  of  a  representative  of  Rau's  estate  there 
was  no  one  on  whom  the  plaintiffs  could  call  for  additional  margin  or 
to  close  the  transactions,  and  no  one  to  give  directions  in  its  be- 
half. The  result  of  continuing  the  transaction  might  be  favorable 
or  unfavorable,  but  which,  could  not  be  foreseen.  We  think  the 
plaintiffs  were  authorized,  acting  in  good  faith,  to  maintain  the 
existing  situation  until  a  representative  of  the  estate  should  be  ap- 
pointed. They  had  such  an  interest  in  the  transaction  by  reason  of 
the  personal  obligation  they  had  assumed,  as  entitled  them  to  con- 
tinue it  until  that  time. 


END  OF  VOLUME  ON^ 


TABLE  OF  CASES 

Acme  Coal  Company  v,  Northrup  National  Bank.  23 

Wyo.  66  I 

Adams  v.  Messinger.  147  Mass.  185 

Adams  v.  Power.  48  Miss.  450 

Adams  v.  Wright.  14  Wis.  408 I 

Aiken  v.  Blaisdell.  41  Vt.  655   

Alabama  Great  Southern  Railroad  Company  v.  McKen- 

zie.  139  Ga.  410 

Aldrich  v.  Ames.  9  Gray  (Mass.)  76 

Allen  V.  Elmore.  121  la.  241 

Allen  Grocery  Co.  v.  Bank  of  Buchanan  County.  192 

Mo.  App.  476  I 

American  Live  Stock  Commission  Co.  v.  The  Chicago 

Live  Stock  Exchange.  143  111.  210 I 

American  Railway-Frog  Co.  v.  Haven.  loi  Mass.  398  .  .   I 
American  Sales  Book  Co.  v.  Whitaker,  100  Ark.  360  ,  . 

Anchor  Electric  Co.  v.  Hawkes.  171  Mass.  loi 

Anderson  v.  Wisconsin  Central  Railway  Company.  107 

Minn.  296 

Angus  V.  Downs.  85  Wash.  75 I 

Arkansas  Valley  Smelting  Co.  v.  Belden  Mining  Co.  127 

U.  S.  379  

Arnold  v.  Clifford.  2  Sumner  (C.C.U.S.)  238 

Arnold  v.  Delano.  4  Cush.  (Mass.)  33 

Arnold  v.  North  American  Chemical  Co.  232  Mass.  196 

Askew  V.  Silman.  95  Ga.  678 I 

Atherton  v.  Newhall.  123  Mass.  141 

Atlanta  &  Walworth  Butter  &  Cheese  Association  v. 

Smith.    141  Wis.  377 I 

Atlantic  Dock  Co.  v.  Leavitt.  54  N.Y.  35 

Atlantic  &  North  Carolina  Railroad  Co.  v.  Atlantic  and 

North  Carolina  Co.  147  N.C.  368 

Atwood  V.  Fiske.  loi  Mass.  363  

Austin  V.  Burge.   156  Mo.  App.  286 

Bacon  v.  Christian.  184  Ind.  517   I 

Bacon  v.  Parker.    137  Mass.  309   

Bagby  &  Rivers  Company  v.  Rivers.   87  Md.  400 I 

Baldwin  v.  Canfield.  26  Minn.  43   I 

505 


5o6  COMMERCIAL   LAW    CASES 

Bank  of  Batavia  v.  New  York,  Lake  Erie  and  Western 

Railroad  Co.    io6  N.Y.   195    I,  429 

Bank  of  Houston  v.  Day.  145  Mo.  App.  410 II,     22 

Bank  of  Montpelier  v.  Montpelier  Lumber  Co.  16  Ida. 

730 II,  108 

Barclay  v.  Barrie.  209  N.Y.  40 II,  232 

Barnard  v.  Campbell.  55   N.Y.  456    I,  352 

Barnard  v.  Kellogg.  10  Wall.  (U.S.)  383 I,  324 

Bartlett  v.  Robinson.  39  N.Y.  187 II,  113 

Barwick  v.  English  Joint  Stock  Bank.  L.R.  2  Ex.  Cas. 

(Eng.)   259   I,  461 

Bassenhorst  v.  Wilby.  45  Oh.  St.  333  . ., II,     68 

Bath  Gas  Light  Co.  v.  Clafify.  151  N.Y.  24 II,  308 

Beach  v.  Palisade  Realty  &  Amusement  Co.  86  N.J.L. 

238 II,  365 

Beck  &  Pauli  Lithographing  Co.  v.  Colorado  Milling  and 

Elevator  Co.  52  Fed.  700 I,  215 

Beecher  v.  Bush.  45  Mich.   188   II,  175 

Beedy     v.     Braman     Wooden     Ware     Co.     108     Me. 

200 I,  300 

Behn  v.  Burness.  3  B.  &  S.  (Eng.)  751 I,  127 

Bensel  v.  Anderson.  85  N.J.E.  391    I,  148 

Bentley  v.  Doggett.  51  Wis.  224 , I,  43° 

Bergen  v.  Trimble.  130  Md.  559 II,     91 

Bergh  v.  Warner.  47  Minn.  250 *  I,  438 

Bessenger  v.  Wenzel.   161   Mich.  61    II,  107 

Bethell  &  Co.  v.  Clark  &  Co.  L.R.  20  Q.B.D.  (Eng.)  615  I,  376 

Bibb  V.  Allen.  149  U.S.  481   I,  442 

Billings's  Appeal.   106  Pa.  558   I,  191 

Bird  V.  Munroe.  66  A'Ic.  337  I,  293 

Birmingham  Matinee  Club  v.  McCarty.  152  Ala.  571  .  I,  491 
Blackburn  Bobbin  Co.,  Ltd.  v.  Allen  &  Sons,  Ltd.  (1918) 

I  K.B.   (Eng.)    540   I,  258 

Blackwell  v.  Kercheval.  27  Ida.  537 I,     80 

Boomer  v,  Wilbur.  176  Mass.  482  I,  467 

Boston  &  Colorado  Smelting  Co.  v.  Smith,  13  R.I.  27  .  . .  II,  173 

Boston  Foundry  Company  v.  Wbiteman.  31  R.I.  88  .  . .  II,  213 
Boston     Glass     Manufactory    v.     Langdon.    24    Pick. 

(Mass.)   49    11,  375 

Boston  Ice  Co.  v.   Potter.    123   Mass.  28    I,     12 

Bowditch  V.  Jackson  Co.  76  N.H.  351  II,  377 

Bowditch  V.  New  England  Mutual  Life  Insurance  Co. 

141    Mass.  292    I,  155 

Boyden  v,  Boydcn.  9  Mete.  (Mass.)  519 I,     95 

Bradbury  v.  Llic  Boston  Canoe  Club.  153  Mass.  'j'j II,  299 


TABLE    OF    CASES  507 


Braddock,  Wm.,  Jr.  v.  The  Philadelphia,   Marltoii  & 

Medford  Railroad  Co.  45  N.J.L.  363   I 

Brady  v.  Equitable  Trust  Co.  178  Ky.  693 

Brauer  v.  Shaw.  168  Mass.  198   

Breed  v.  Judd.  i  Gray  (Mass.)  455  

Brewer  v.  The  Boston  Theater.  104  Mass.  378 I 

Brice  v.  Bannister.  L.R.  3  Q.B.D.  (Eng.)  569 

Bridgers  v.  Staton,  150  N.C.  216 I 

Briggs  V.  Partridge.  64  N.Y.  357 

Bright  V.  Offield.  81  Wash.  442 I 

Brittain  v.  Westall.  137  N.C.  30   

Broadnax  v.  Ledbetter.  100  Tex.  375  

Brock  V.  Clark.  60  Vt.  551    

Bronson's  Executor  v.  Chappell.  12  Wall.  (U.S.)  681   . 

Brooks  V.  Cooper.  50  N.J.E.  761   

Brooks  V.  White.  2  Mete.  (Mass.)  283 

Brown  v.  Whipple.  58  N.H.  229 

Brown  v.  Winona  &  St.  Peter  Railroad  Company.  27 

Minn.  162 

Bryant's  Pond  Steam  Mill  Co.  v.  Felt.  87  Me.  234  ...  I 

Buie  V.  Kennedy.  164  N.C.  290 I 

Bullard  v.  Bell,  i  Mason  (C.C.U.S.)  243 I 

Burgan  v.  Lyell.  2  Mich.  102 I 

Burnley  v.  Tufts.  66  Miss.  48 

Butler  V.  Gleason.  214  Mass.  248  

Butler  Paper  Co.  v.  Cleveland.  220  111.  128 I 

Butler  Savings  Bank  v.  Osborne.  159  Pa.  St.  10 I 

Butterfield  v.  Byron.  153  Mass.  517 

Button  V.  Hoffman.  61  Wis.  20 I 

Cabeen  v.  Campbell.  30  Pa.  St.  254 

Caldwell  v.  Wentworth.  14  N.H.  431  

Cape  Charles  Bank  v.  Farmers  Mutual  Exchange.  120 

Va.  771   I 

Capen  v.  Barrows,  i  Gray  (Mass.)  376 

Capital  National  Bank  v.  American  Exchange  National 

Bank.  51  Neb.  707 I 

Capwell  v.  Machon.  21  R.I.  520 I 

Carlill  v.  The  Carbolic  Smoke  Ball  Co.  (1893)   i  Q.B. 

(Eng.)  256 

Carter  v.  Phillips.  144  Mass.  100 

Cayuga  County  Bank  v.  Warden,  i  N.Y.  413 I 

Central  Transportation  Co.  v.  Pullman's  Palace  Car  Co. 

139  U.S.  24 I 

Central  Trust  Co.  v.  Bridges.  57  Fed.  753 


.  342 

.  59 
,  21 

,  91 

.  355 
,  187 
.  358 
,  481 
,  10 
,  456 
,  16 
,  398 
,  428 
,  164 
,  64 
,  295 

,  444 
,  331 
,  178 
,  28 
,  202 

,  349 
,  130 
,  291 

,  183 
,  260 

-  274 

,  375 
,  248 

,  132 

,  197 


,  26 
,  217 


,  310 
,  409 


508  COMMERCIAL   LAW    CASES 

Central  Trust  Co,  v.  Chicago  Auditorium  Association. 

240  U.S.  581   

Challiss  V.  McCrum.  22  Kas.  157 I 

Charlestown  Boot  &  Shoe  Co.  v.  Dunsmore.  60  N.H.  85  .    I 
Cherokee  National  Bank  v.  Union  Trust  Company.  33 

Okla.  342   I 

Chicopee  Bank  v.  Philadelphia  Bank.  8  Wall.  (U.S.)  641     I 

Clements  v.  Jessup.  36  N.J.E.  569 I 

Clews  V.  Friedman.  182  Mass.  555 I 

Cloe  V.  Rogers.  31  Okla.  255   

Codd  V.  Rathbone.  19  N.Y.  37 I 

Collender  v.  Dinsmore.  55  N.Y.  200 

Collins  V.  Blantern.  2  Wil.  (Eng.)  341   

Collyer  v.  Moulton.  9  R.L  90 

Columbian  Banking  Company  v.  Bowen.  134  Wis.  218      I 

Commercial  Bank  of  Selma  v.  Hurt.  99  Ala.  130 

Conahan  v.  Fisher.  233  Mass.  234 

Cone  V.  Russell.  48  N.J.E.  208 I 

Consterdine  v.  Moore.  65  Neb.  291   I 

Cooke  V.  Millard.  65  N.Y.  352    

Copeland  v.  Burk.  59  Okla.  219 I 

Cota  V.  Buck.  7  Mete.  (Mass.)  588 I 

Couch  V.  Waring.  9  Conn.  261 I 

Coursolle  v.  Weyerhauser.  69  Minn.  328  

Cover  V.  Myers.  75  Md.  406 I 

Cox  V.  Bowling.  54  Mo.  App.  289 

Cox  V.  Hickman.  8  H.L.  Cas.  (Eng.)  268 I 

Cox  V.  National  Bank  of  New  York.  100  U.S.  704 I 

Cox  V.  Willoughby.  L.R.  13  Ch.  D.  (Eng.)  863 I 

Crandall  v.  Willig.  166  111.  233 

Crane  v.  Gruenewald.  120  N.Y.  274 

Cranson  v.  Goss.  107  Mass.  439 ; 

Cummings  v.  Arnold.  3  Mete.  (Mass.)  486 

Curtis  V.  Davidson.  215  N.Y.  395  ■   I 

Cutter  V.  Powell.  6  T.R.  (Eng.)  320 

Daly  &  Sons,  Inc.  v.  The  New  Haven  Hotel  Co.  91 

Conn.  280 

Davis  V.  Davis.  (1894)  i  Ch.  (Eng.)  393 

Davis  V.  Howell.  33  N.J.E.  72 , 

Davis  V.  Patrick.  141  U.S.  479 

Davis  Sulphur  Ore  Co.  v.  Atlanta  Guano  Co.  109  Ga.  607 

Davison  v.  Holdcn.  55  Conn.  103  

Dawe  V.  Morris.  149  Mass.  188 

Day  V.  Caton.  1 19  Mass.  513  

Daylight  liurncr  Co.  v.  Odlin.  51  N.H.  56 


TABLE   OF    CASES  509 

Deardorff  v.  Foresman,  24  Ind,  481  .II,     36 

DeCicco  V.  Schweizer.  221  N.Y.  431   I,     74 

Delaware  Bank  v.  Jarvis.  20  N.Y.  226 II,     78 

Dennistoun  &  Company  v.  Stewart,  ly  How.  (U.  S.)  606.    II,  143 
Denver  Fire  Insurance  Co.  v,  McClelland.  9  Col.  11  ...    II,  306 

Desmarais  v.  Taft.  210  Mass.  560  I,     55 

Diem  v.  Koblitz.  49  Ohio  St.  41 1,  227 ;  I,  382 

Dillaby  v.  Wilcox.  60  Conn.  71   I,     42 

Doggett,  Ex'x.  V.  Dill.  108  111.  560 II,  240 

Donohue  v.  Woodbury.  6  Cush.  (Mass.)   148 I,     68 

Douglas  V.  Shumway.  13  Gray  (Mass.).  498 I,  371 

Dow  V.  Worthen.  37  Vt.  108 I,  305 

Doyle  V.  Dixon.  97  Mass.  208 I,     52 

Drake  v.  Fairmont  Drain  Tile  &  Brick  Co.  129  Minn.  145       I,  129 

Drake  v.  Wells.  11  Allen  (Mass.)  141  I,     51 

Drew  V.  Nunn.  L.R.  4  Q.B.D.  (Eng.)  661 I,  498 

Driscoll  V.  Towle.  181  Mass.  416 I,  466 

Drummond  &  Sons  v.  Van  Ingen  &  Co.  12  A.C.  (Eng.) 

284 I,  321 

Dudley  v.  Kentucky  High-School.  9  Bush.  (Ky.)  576  .    II,  344 

Dunbar  v.  Tyler.  44  Miss,  i   II,  105 

Duncan  v.  The  New  York  Mutual  Insurance  Co.   138 

N.Y.  88 I,  118 

Dunlop  Pneumatic  Tyre  Co.,  Ltd.  v.  Selfridge  &  Co.,  Ltd. 

L.R.  (1915)  A.C.  (Eng.)  847 I,  I77 

Dwinel  v.  Stone.  30  Me.  384 II,  167 

Dyer  v.  Clark.  5  Mete.  (Mass.)  562 II,  246 

East  Birmingham  Land  Co.  v.  Dennis.  85  Ala.  565 II>  326 

Eastern  Expanded  Metal  Co.  v.  Webb  Granite  and  Con- 
struction Co.  195  Mass.  356  I»  171 

Eastman  v.  Clark.  53  N.H.  276 ". .    H.  169 

Easton  National  Bank  v.  The  American  Brick  &  Tile  Co. 

70  N.J.E.  732   n,  340 

Edgington  v.  Fitzmaurice.  L.R.  29  Ch.  D.  (Eng.)  459       I,  I33 
Edmunds  v.  Merchants'  Despatch  Transportation  Co. 

135  Mass.  283 I,  116 

Eliason  v.  Henshaw.  4  Wheat.  (U.S.)  225  :     I,     29 

Ellerman  v.  The  Chicago  Junction  Railways  &  Union 

Stockyards  Company.  49  N.J.E.  219 II,  354 

Elliott  V.  Home.  10  Ala.  348 I,     9° 

Emerson  v.  Durand,  Executor.  64  Wis.  11 1  1   H,  219 

Emerson  v.  Senter.  118  U.S.  3 II,  252 

Erdman  v.  The  Trustees  of  the  Eutaw  Methodist  Prot- 
estant Church.  129  Md.  595   II,  2ii 


510  COMMERCIAL    LAW    CASES 

Exchange  Bank  of  St.  Louis  v.  Rice.  107  Mass.  37 I,    82 

Exchange  National  Bank  of  Pittsburgh  v.  Third  Na- 
tional Bank  of  New  York.  112  U.S.  276 

Farina  v.  Fickus.  L.R.  (1900)   i  Ch.  (Eng.)  331   

Farmers  National  Bank  of  Annapolis  v.  Venner.   192 

Mass.  531   I] 

Farnsvvorth  v.  Burdick.  94  Kas.  749 I] 

Farnsworth  v.  Hemmer.  i  Allen  (Mass.)  494 

Farquharson  Brothers  &  Co.  v.  King  &  Co.  (1902)  A.C. 

(Eng.)  325  

Fidelity  Trust  Company  v.  Whitehead.  165  N.C.  74  .  . .    I] 

Finley  v.  Smith,  165  Ky.  445 I] 

First  National  Bank  of  Hutchinson,  Kansas  v.  Lightner. 

74  Kas.  736  I] 

First  National  Bank  of  McClusky  v.  Meyer.  30  N.  Dak. 

388 I] 

First  National  Bank  of  North  Bennington  v.  Town  of 

Mt.  Tabor.  52  Vt.  87 

Fisher  Hydraulic  Stone  and  Machinery  Co.  v.  Warner. 

233  Fed.  527  

Fitzgerald  v.  Allen.  128  Mass.  232 

Fletcher  v.  Peck.   6  Cranch  (U.S.)  87 

Foerderer  v.  Tradesmen's  National  Bank.  107  Fed.  219  . 

Foster's  Admr.  v.  Metcalfe.  144  Ky.  385 I] 

Francis  v.  McNeal.  228  U.S.  695 I] 

Fradley  v.  Hyland.  y^  Fed.  49 

Franklin  National  Bank  v.  Roberts  Brothers  Company. 

168  N.C.  473  I] 

Freeman  v.  Robinson.  38  N.J.L.  383 

Friendship  Telephone  Co.  v.  Newark  Telephone  Co.  88 

N.J.E.  562 I] 

Frost  V.  Gage.  3  Allen  (Mass.)  560 

Frye  v.  Burdick.  67  Me.  408 

Furbish  v,  Goodnow.  98  Mass.  296 

Galigher  v.  Jones.  129  U.S.  193 

Galusiia  v.  Slierman.  105  Wis.  263  

Gardner  v.  Gardner.  5  Gush.  (Mass.)  483 

Gardner  v.  Lane.  12  Allen  (Mass.)  39 

Garfield  v.  Paris.  96  U.S.  557 

Gates  V.  Beecher.  60  N.Y.  518 H,  93 ;  11 

Gay  V.  Rooke.  151  Mass.  115   I] 

Genet   v.   71ie   Delaware   and   Hudson   Canal    Co.    136 

N.Y.  593    

Gibbs's  Estate,  Ilallstcad's  Appeal.  157  Pa.  St.  59 I] 


TABLE    OF    CASES  511 

Gillet  V.  Bank  of  America.  i6o  N.Y.  549 I 

Gillis  V.  Cobe.  177  Mass.  584 I 

Gilpin  V.  Savage.  201  N.Y.  167 II 

Goodnow  V.  Empire  Lumber  Co.  31  Minn.  468 I 

Goodspeed  v.  The  East  Haddam  Bank.  22  Conn.  530  .  .  II 

Goodwin  v.  Robarts.  L.R.  10  Ex.  337 II 

Gordon  v.  Levine.  194  Mass.  418 II 

Goshen  National  Bank  v.  Bingham.  118  N.Y.  349 I 

Gould  V.  Bourgeois.  51  N.J.L.  361   I 

Gower  v.  Moore.  25  Me.  16 -  II 

Grafton  v.  Cummings.  99  U.S.  100 I 

Grant  v.  Beard.  50  N.H.  129 I 

Graves  v.  Johnson.  156  Mass.  211  I 

Gray  v.  Gardner.  17  Mass.  187   I 

Gregory  v.  Lee.  64  Conn.  407 I 

Griffith  V.  Charlotte  R.  R.  Co.  23  S.C.  25 I 

Griswold  v.  Eastman.  51  Minn.  189 I 

Groth  v.  Kersting.  23  Col.  213 II 

Groves  v.  Groves.  65  Oh.  St.  442 I 

Gruen  v.  Ohl  &  Co.  81  N.J.L.  626 I 

Gwilliam  V.  Twist.  (1895)  2  Q.B.  (Eng.)  84 I 

H.  B.  Claflin  Co.  v.  Evans.  55  Oh.  St.  183 II 

Hackley  v.  Headley.  45  Mich.  569 I 

Hagan  v.  Scottish  Insurance  Company.  186  U.S.  423  .  .  I 

Hale  v.  Gerrish.  8  N.H.  374  I 

Haluptzok  v.  Great  Northern  Railway  Co.  55  Minn.  446  I 

Hanover  National  Bank  v.  Blake.  142  N.Y.  404 I 

Harkness  v.  Russell.  1 18  U.S.  663 I 

Harrison  v.  Nicollet  National  Bank  of  Minneapolis.  41 

Minn.  488 II 

Hart  V.  Woodruff.   24  Hun  (N.Y.)  510 II 

Hartshorn  v.  Day.    19  How.  (U.S.)  211 I 

Hartwig  v.  Rushing.  93  Ore.  6 I 

Haskell  v.  Avery.  181  Mass.  106 II 

Hatch  V.  Taylor.  10  N.H.  538  I 

Haven  v.  Foster.  9  Pick.  (Mass.)  iii I 

Hawes  v.  Smith.  12  Me.  429 I 

Hayden  v.  Charter  Oak  Driving  Park.  63  Conn.  142  . .  I 

Hayes  v.  City  of  Nashville.  80  Fed.  641  I 

Hayward  v.  Leonard.  7  Pick.  (Mass.)  180 I 

Hearns  v.  Waterbury  Hospital.  66  Conn.  98 I 

Heart  v.  East  Tennessee  Brewing  Company.  121  Tenn. 

69 I 

Heath  v.  Stoddard.  91  Me.  499  I 


512  COMMERCIAL   LAW    CASES 

Heinemann  v.  Heard.  50  N.Y.  27 

Hendren  v.  Wing.  60  Ark.  561 I 

Henry  v.  Heeb.  1 14  Ind.  275 

Hermann  v.  Charlesworth.  (1905)  2  K.B.  (Eng.)   123  . 

Herring  v.  Skaggs.  62  Ala.  180 

Herrington  v.  Davitt.  220  N.Y.  162 

Hess  V.  Rau.  95  N.Y.  359 

Heurtematte  v.  Morris.  loi  N.Y.  63 I 

Heyn  v.  O'Hagen.  60  Mich.  150 

Hibbard,  Spencer  &  Bartlett  v.  Peek.  75  Wis.  619 

Higbie  v.  Rust.  211  111.  333 

Higgins  V.  Moore.  34  N.Y.  417 

Highway  Commissioners  v.  The  City  of  Bloomington. 

253  111.   164   

Hinnen  v.  Newman.  35  Kas.  709 

Hirth  V.  Graham.  50  Oh.  St.  57 

Hoare  v.  Cazenove.  16  East  (Eng.)  391  I 

Hodge  V.  Smith.  130  Wis.  326 I 

Hodges  V.  Shuler.  22  N.Y.  114 I 

Hodges  V.  Wilkinson,  iii  N.C.  56 

Hoffman  v.  American  Exchange  National  Bank.  2  Neb. 

(Unoff.)  217 I 

Hoffman  v.  Planters  National  Bank.  99  Va,  480 I 

Holbrook  v.  Lackey.  13  Mete.  (Mass.)  132 I 

Homer  Ramsdell  Transportation  Co.  v.  La  Compagnie 

Generale  Transatlantique.  182  U.S.  406 

Hooker  v.  The  Midland  Steel  Co.  215  111.  444 I 

Hope  V.  The  Valley  City  Salt  Co.  25  W.  Va.  789 I 

Hopkins  v.  Cowen.  90  Md.  152 

Houlditch  V.  Desanges.  2  Starkie  (Eng.)  337 

Hovey  v.  Hobson.  53  Me.  45 1    

Howard  v.  Daly.  61  N.Y.  362  

Howe  V.  Newmarch.  12  Allen  (Mass.)  49 

Hoyt  V.  Thompson's  Executor.  19  N.Y.  207 , I 

Hughes  V.  Gross.  166  Mass.  61   I 

Hull  V.  Ruggles.  56  N.Y.  424 

Hun  V.  Gary.  82  N.Y.  65 I 

Hunt  &  Co.  V.  Benson.  2  Humph.  (Tenn.)  459 I 

Hunt  V.  Rousmanicr's  Administrators.  8  Wheat.  (U.S.) 

174 

Hunter  v.  Anthony.  53  N.C.  385   

Huntington  v.  Knox.  7  Cush.   (Mass.)  371   

Hurff  V.  Hires.  40  N.J.L.  581  

Hutchinson  v.  Nay.  187  Mass.  262 T 


,  446 

.  197 
,  426 

.  173 

,  452 
.  78 
.  503 
.  75 
,  416 

,  453 
,  75 
,  453 

,  10 

,  154 
,  50 
,  144 
,  62 
,  18 
,  312 

,  156 
,  127 
,  250 

,  467 

,  369 
,  280 

,  343 
,  372 
,  106 

,  443 
,  462 

.  350 
,  234 
,  162 
,  366 
,  191 

,  501 
,  208 

,  488 

.  333 

.  257 


TABLE    OF    CASES  $13 

Imperial  Building  Co.  v.  The  Chicago  Open  Board  of 

Trade.  238  111.  100  II,  289 

Ingraham  v.  Union  Railroad  Company.  19  R.I.  356  ....  I,  307 

In  re  C.  B.  Comstock  &  Co.  3  Sawyer  (C.C.U.S.)  218  .  .  II,  292 

In  re  Estate  Philpott.  169  la.  555 II,     65 

In  re  E.  W.  A.,  a  Debtor.  (1901)  2  K.B.  (Eng.)  642  .  .  I,  196 

In  re  Wright.  157  Fed.  544 I,  192 

Inter-State  Grocer  Co.  v.  Bentley  Co.  214  Mass.  227  .  .  I,  317 

Ireland  v.  The  Palestine,  etc.,  Turnpike  Co.  19  Oh.  St.  369  II,  339 

Irwin  V.  Williar.  1 10  U.S.  499 I,  160 

Jackson  Bank  v.  Durfey.  ^2.  Miss.  971 II,  241 

Jackson  Paper  Manufacturing  Co.  v.  Commercial  Na- 
tional Bank.  199  111.  151   I,  458 

Jacobs  V.  Day.  25  N.Y.S.  763  I,  318 

Jacobus  V.  Jamestown  Mantel  Co.  211  N.Y,  154 II,  372 

James  v.  City  of  Newton.  142  Mass.  366 I,   186 

Jefferson  Bank  of  St.  Louis  v.  Chapman-White-Lyons 

Co.  122  Tenn.  415 II,     61 

Jennings  v.  Dunham.  60  Mo.  App.  635 I,  304 

Jerman  v.  Edwards.  29  App.  (D.C.)  535 II,     56 

Johnson  v.  Credit  Lyonnais  Co.  L.R.  3  C.P.D.  (Eng.)  32  I,  356 

Johnson  v.  Dodge.  17  111.  433 I,  410 

Johnson  v.  Eveleth.  93  Me.  306 I,  373 

Johnson  v.  Jackson.  130  Ky.  751 II,  261 

Johnson  v.  Northwestern  Mutual  Life  Insurance  Co.  56 

Minn.  365   I,     92 

Johnson  v.  Wingfield.  42  S.W.  (Tenn.  Ch.  App.)  203  .  II,  215 

Johnson  and  Bedford  v.  Mitchell.  50  Tex.  212 11,     54 

Johnston  v.  Bent.  93  Ala.  161    «  I,  126 

Johnston  &  Co.  v.  Dutton's  Adm'r.  27  Ala.  245 II,  200 

Jones  V.  Earl.  37  Cal.  630 I,  373 

Jones  V.  Newport  News  and  Mississippi  Valley  Co.  65 

Fed.  736 I,  214 

Jones  V.  Padgett.  L.R.  24  Q.B.D.  (Eng.)  650 I,  322 

Jordan  v.  Dobbins'  Adm.  122  Mass.  168 I,     22 

Jump  V.  Sparling.  218  Mass.  324 I,  484 

Karrick  v.  Hannaman.  168  U.S.  328 II,  227 

Kayton  v.  Barnett.  116  N.Y.  625 I,  480 

Keighley  v.  Durant.  (1901)  A.C.  (Eng.)  240 I,  414 

Keightley  v.  Watson.  L.R.  3  Ex.  Rep.  (Eng.)  716 I,  193 

Kellogg  Bridge  Co.  v.  Hamilton,  no  U.S.  108 I,  314 

Kelly  V.  Newburyport  Horse  Railroad  Co.  141  Mass.  496  I,  422 
Kennedy  v.  Panama,  etc.,  Royal  Mail  Co.  L.R.  2  Q.B. 

Cas.   (Eng.)   580   I,  119 

Kentucky  Block  Cannel  Coal  Co.  v.  Sewell.  249  Fed.  840  ,  II,  194 


514  COMMERCIAL    LAW    CASES 

Kerfoot  v.  The  Farmers'  &  Merchants'  Bank,  218  U.S. 

281  n,  305 

Kershaw  v.  Ladd.  34  Ore.  375 II,  157 

Kilday  v.  Schancupp.  91  Conn.  29 I,     55 

Kilgore  v.  Rich.  83  Me.  305 I,     89 

Kimball,  The.  3  Wall.  (U.S.)  37 I,  247 

Kimberly  v.  Patchin.  19  N.Y.  330 I,  332 

King  V.  Crowell.  61  Me.  244 II,     97 

King  V.  Moore.  72  Ark.  469 II,  223 

Kingan  &  Co.,  Ltd.  v.  Silver.  13  Ind.  App.  80 I,  404 

Kingman  &  Co.  v.  Western  Mfg.  Co.  92  Fed.  486 I,  393 

Kingman  v.  Spurr.  7  Pick.  (Mass.)  235 II,  218 

Kline  Bros.  &  Co.  v.  Royal  Insurance  Co.,  Ltd.   192 

Fed.  378  ' I,  425 

Korkemas  v.  Macksoud.  131  App.  Div.  (N.Y.)  728 II,  126 

Kroeger  v.  Pitcairn.  loi  Pa.  St.  311  I,  474 

Kuser  v.  Wright.  52  N.J.E.  825   II,  352 

Kyle  V.  Kavanagh.  103  Mass.  356 I,  114 

Laflin  and  Rand  Powder  Company  v.  Burkhardt.  97  U.S. 

no I,  282 

Lamkin  &  Foster  v.  LeDoux.  loi  Me.  581   I,     99 

Land   Grant   Railway   &  Trust   Co.  v.   The   Board   of 

County  Commissioners  of  Coffey  County.  6  Kas.  245  II,  295 

Latta  V.  Kilbourn.  150  U.S.  524  II,  217 

Law  V.  Redditch.  (1892)  i  Q.B.  (Eng.)  127 I,  254 

Lawrence  v.  Miller.  16  N.Y.  235 II,  ill 

Leavitt  v.  Fiberloid  Company.  196  Mass.  440 I,  396 

Leggett  V.  Hyde.  58  N.Y.  272 II,  170 

Leserman  v.  Bernheimer.  113  N.Y.  39 II,  262 

Lewenstein  v.  Forman.  223  Mass.  325   ,11,     41 

Lewis,  Hubbard  &  Co.  v.  Morton,  80  W.  Va.  137 II,  140 

Lill  V.  Gleason.  92  Kas.  754 II,  136 

Lindquist  v.  Dickson.  98  Minn.  369 I,  480 

Lindsay  v.  Smith.  78  N.C.  328 I,  171 

Lingham  v.  Eggleston.  27  Mich.  324  I,  326 

Linick  v.  Nutting  &  Co.  140  App.  Div.  (N.Y.)  265 II,     32 

Linn  v.  Horton.  17  Wis.  151  H,  118 

Linthicum  v.  Bagby.  131  Md.  644 H,  119 

Litchfield  v.  Hutchinson.  117  Mass.  195 I,  135 

Lloyd  V.  Grace,  Smith,  &  Co.  (1912)  A.C.  (Eng.)  716  I,  462 

Lloyd  V.  Scott.  4  Peters  (U.S.)  205  I,  163 

LobdcU  v.  Baker.  3  Mete.  (Mass.)  469 II,     76 

London  Joint  Stock  Bank,  Limited  v.  Macmillan  and 

Arthur.  (1918)  A.C.  (Eng.)  -j-jj II,  152 

Long  v.  Hartwcll,  Administrator.  34  N.J.L.  116 L  411 


TABLE   OF    CASES  51 5 

Lorah  v.  Nissley.  156  Pa.  St.  329 I,     36 

Lord  V.  Hull.  178  N.Y.  9 II,  222 

Lord  V.  Parker.  3  Allen  (Mass.)  127 I,  109 

Loring  v.  City  of  Boston.  7  Mete.  (Mass.)  409 I,     24 

Lorymer  v.  Smith,  i  B.  &  C.  (Eng.)   i I,  320 

Loud  V.  Pomona  Land  and  Water  Co.  153  U.S.  564  ....  I,  224 

Lough  V.  John  Davis  &  Co.  30  Wash.  204 I,  472 

Low  V.  Pew.  108  Mass.  347 I,  329 

Lowenstein  v.  Lombard,  Ayres  &  Co.  164  N.Y.  324  ...  I,  457 

Lucas  V.  The  Western  Union  Tel.  Co.  131  la.  669 I,     30 

Luthy  V.  Ream.  270  111.  170 II,  359 

Mabardy  v.  McHugh.  202  Mass.  148 ,  I,  137 

Madden  v.  Electric  Light  Co.  181  Pa.  617  II,  296 

Madison  Ave.  Baptist  Church  v.  The  Baptist  Church  in 

Oliver  St.  46  N.Y.  131  I,  278 

Mallory  v.  Gillett.  21  N.Y,  412 I,     43 

Manufacturers  and  Traders'  Bank  v.  Love.  13  App.  Div. 

(N.Y.)   561    I,  483 

Marcus  v.  McFarland.  119  Md.  269 ,  II,  193 

Margraf  v.  Muir.  57  N.Y.  155  I,     63 

Marsh  v.  Wheeler,  "jj  Conn.  449 II,  205 

Martlett  v.  Jackman.  3  Allen  (Mass.)  287 II,  230 

Mattison  v.  Marks.  31  Mich.  421 II,     18 

Mausert  v.  Feigenspan,  68  N.J.E.  671 II,  371 

Mayer  v.  McCreery.  1 19  N.Y.  434 I,     18 

McArthur  v.  Times  Printing  Company.  48  Minn.  319  .  .  I,  421 

McCarter  v.  Firemen's  Insurance  Co.  74  N.J.E.  372  ...  II,  284 
McCarthy  v.  Bowling  Green  Storage  &  Van  Co.  182  App. 

Div.  (N.Y.)   18 I,  105 

McCarthy  v.  Hughes.  36  R.I.  66 I,  471 

McCarthy  v.  Timmins.  178  Mass.  378 I,  465 

McClenathan  v.  Davis.  243  111.  87 II,     15 

McClure  v.  Law.  161  N.Y.  78 II,  368 

McCormack  v.  Williams.  88  N.J.L.  170 II,     yj 

McCormick  v.  Shea.  99  N.Y.S.  467 II,  129 

McCracken  v.  City  of  San  Francisco.  16  Cal.  591 I,  415 

McCreery  v.  Day.  1 19  N.Y.  i   I,  238 

McElwee  v.  Metropolitan  Lumber  Co.  69  Fed.  302  ....  I,  367 

McGill  V.  Chilhowee  Lumber  Company,  iii  Tenn.  552  .  I,  379 

Mclntyre  v.  Park.  11  Gray  (Mass.)   102 I,  420 

MacLean  v.  Dunn.  4  Bing.  (Eng.)  722 I,  419 

McLeod  v.  Hunter.  61  N.Y.S.  73 II,     21 

McNeal  v.  Braun.  53  N.J.L.  617 I,  339 

Mechanics'  Bank  of  the  City  of  New  York  v.  Straiton. 

3  Keyes  (N.Y.)  365 II,     30 


5l6  COMMERCIAL   LAW    CASES 

Meehan  v.  Valentine.  145  U.S.  611 :  I 

Meigs  V.  Dexter.  172  Mass.  217 

Memphis  &  Charleston  Railroad  Co,  v.  Woods.  88  Ala. 

630 I 

Menagh  v.  Whitwell.  52  N.Y.  146 I 

Merchants'  National  Bank  of  Cincinnati  v.  Bangs.  102 

Mass.  291   

Meriden  Britannia  Co.  v.  Zingsen.  48  N.Y.  247 

Miles  V.  Schmidt.  168  Mass.  339 

Miller  v.  Farmers'  Milling  &  Elevator  Co.  78  Neb.  441 . .    I 

Miller  v.  Marks.  46  Ut.  257   I 

Milliken  v.  Skillings.  89  Me.  180 

Mills  V.  Wyman.  3  Pick.  (Mass.)  207 

Minneapolis  &  St.  Louis  Railway  v.  Columbus  Rolling 

Mill.   119  U.S.   149   

Mitchell  V.  Inhabitants  of  Albion.  81  Me.  482 I 

Mollwo,  March  &  Co.  v.  The  Court  of  Wards.  L.R.  4 

P.C.  (Eng.)  419 I 

Montagu  v.  Forwood.  (1893)  2  Q.B.  (Eng.)  350 

Moore  v.  Detroit  Locomotive  Works.  14  Mich.  266  .... 

Moore  v.  Lowrey.  25  la.  336 

Moore  v.  Vulcanite  Portland  Cement  Co.  121  App.  Div. 

(K:Y.)   667  

Morgan  v.  Lewis.  46  Oh.  St.  i   I 

Morrison  v.  The  Austin  State  Bank.  213  111.  472 I 

Morse  v.  Wheeler.  4  Allen  (Mass.)  570 

Morse  v.  Woodworth.  155  Mass.  233 , 

Moulton  V.  Kershaw.  59  Wis.  316 

Murray  v.  Thompson.  136  Tenn.  118   I 

Murrill  v.  Neill.  8  How.  (U.S.)  414 I 

National  Bank  v.  Watsontown  Bank.  105  U.S.  217 I 

National  Bank  of  Commerce  v.  Bossemeyer.  loi  Neb.  96  I 
National  Copper  Bank  v.  Davis  County  Bank.  47  Ut.  236  I 
National  Park  Bank  v.  Saitta.  127  App.  Div.  (N.Y.)  624.  I 
Newhall  v.  Central  Pacific  Railroad  Co.  51  Cal.  345  .... 

Newman  v.  Sylvester.  42  Ind.  106 

Nichol  V.  Godts.  10  Ex.  Rep.  (Eng.)   191   

Nicoll  V.  The  New  York  &  Erie  Railroad  Co.  12  N.Y. 

121   I 

Nims  V.  Mount  Hcrmon  Boys'  School.  160  Mass.  177  . .    I 

Nixon  V.  Brown.  57  N.H.  34 

Norrington  v.  Wright.  115  U.S.  188 

Norlhcrn  Supi)ly  Co.  v.  Wangard.  117  Wis.  624 

O'Brien  v.  Boland.  166  Mass.  481  1 


TABLE    OF    CASES  $iy 

O'Conner  Mining  &  Manufacturing  Co.  v.  Coosa  Fur- 
nace Co.  95  Ala.  614 ,11,  363 

O'Neill  V.  Supreme  Council,  American  Legion  of  Honor. 

70  N.J.L.  410 I,  251 

Oiifenstein  v.  Weygandt.  89  Kas.  739 II,     52 

Ogden  V.  Ogden.  i  Bland  (Md.)  284.  . .' I,    49 

Oregon  Pacific  Railroad  Co.  v.  Forrest.  128  N.Y.  83  .  .  I,  146 

Page  V.  Citizens  Banking  Co.  iii  Ga.  73 II,  212 

Page  V.  Trufant.  2  Mass.  159 I,     61 

Paine  v.  Brown.  37  N.Y.  228 I,  218 

Pancoast  v.  Dinsmore.  105  Me.  471 I,  492 

Parker  v,  Russell.  133  Mass.  74 ;    I,  252 

Parrot  v.  Mexican  Central  Railway  Co.  207  Mass.  184  I,     71 

Pease  v.  Cole.  53  Conn.  53 ,  II,  204 

Pender  v.  Lushington.  L.R.  6  Ch.  D.  (Eng.)  70 II,  356 

People  V.  Lewinger.  252  111.  332  II,     39 

People  V.  The  Pullman's  Palace  Car  Co.  175  111.  125  . . .,  II,  272 
People  ex  rel.  The  New  York  Institution  for  the  Blind  v. 

Fitch.  154  N.Y.  14 _  II,  285 

People  ex  rel.  The  Union  Trust  Co.  v.  Coleman.  126  N.Y. 

433 II,  321 

People  ex  rel.  Winchester  v.  Coleman.  133  N.Y.  279. ...  II,  275 

People's  Bank  v.  Franklin  Bank.  88  Tenn.  299 II,  I54 

People's  State  Bank  v.  Miller.  185  Mich.  565 II,     64 

Peoria  Insurance  Company  v.  Botto.  47  111.  516 I,  237 

Person  &  Riegel  Co.  v.  Lipps.  219  Pa.  99 II,  322 

Persons  v.  Oldfield.  loi  Miss,  no II,  210 

Phelps  V.  Stocking.  21  Neb.  443   II,  117 

Phelps  V.  Weber.  84  N.J.L.  630 II,     43 

Phillips  V.  Phillips.  49  111.  437 II,  165 

Phillips's  Estate.  No.  3.  205  Pa.  515 I,  189 

Piaggio  V.  Somerville.  1 19  Miss.  6 I,  256 

Pickering  V.  Busk.  15  East  (Eng.)  38 I,  355 

Pierce  v.  Cate.  12  Cush.  (Mass.)  190 II,     87 

Pierson  &  Pierson  v.  Hooker.  3  Johns.  (N.Y.)  68 II,  207 

Poel  V.  Brunswick-Balke-Collender  Co.  216  N.Y.  310  .  I,     31 

Pollock  V.  Cohen.  32  Oh.  St.  514 I,  424 

Pool  V.  The  City  of  Boston.  5  Cush.  (Mass.)  219 I,     70 

Pooley  V.  Driver.  L.R.  5  Ch.  D.  (Eng.)  458 II,  162 

Presbyterian  Church  v.  Cooper.  112  N.Y.  517 I,    84 

Public  Bank  of  New  York  City  v.  Burchard.  135  Minn. 

171   II,  128 

Putnam  v.  Misochi.  189  Mass.  421   I,  198 

Race  V.  Hansen.  12  111.  App.  605 I,  348 

Rand  v.  Nutter.  56  Me.  339 ;  I,  195 


5l8  COMMERCIAL    LAW    CASES 

Randall  V.  Hazelton.  12  Allen  (Mass.)  412 ;  I,  138 

Randall  v.  Newson.  L.R.  2  Q.B.D.  (Eng.)  102 I,  323 

Ray  V.  Thompson.  12  Cush.  (Mass.)  281   I,  228 

Redding  v.  Vogt.  140  N.C.  562 I,  232 

Reggio  V.  Warren.  207  Mass.  525   i,  123 

Reigart  v.  Manufacturers  Coal  and  Coke  Company.  217 

Mo.  142   I,  296 

Rice  V.  Nixon.  97  Ind.  97 I,  283 

Richards  v.  Northwestern  Coal  &  Mining  Co.  221  Mo. 

149  n,  379 

Riley  v.  Mallory.  33  Conn.  201 I,     86 

Roberts  v.  Banse.  78  N.J.L.  57 I,     68 

Roberts  v.  Ely.  113  N.Y.  128 I,  I79 

Robinson  v.  Daughtry.  171   N.C.  200  II,  206 

Robinson  v.  Reynolds,  i  Aikens  (Vt.)  174 I,  108 

Rodgers  v.  Clement.  162  N.Y.  422 II,  220 

Rodgers  v.  Phillips.  40  N.Y.  519 I,  298 

Rodijkeit  v.  Andrews.  74  Oh.  St.  104 I,  183 

Roscorla  v.  Thomas.  3  Q.B.  (Eng.)  234 I,     76 

Rosenbaum  v.  Hazard.  233  Pa.  206 II,  150 

Rosenstein  v.  Burns.  41  Fed.  841   II,  233 

Rowe,  Trustee  v.  Rand,  Receiver,  iii  Ind.  206 ,  I,  494 

Rowell  V.  Rowell,  Adm.  122  Wis.  i   II,  197 

Rowley  v.  Bigelow.  12  Pick.  (Mass.)  306 I,  140 

Rummell  v.  Blanchard.  216  N.Y.  348 I,  369 

Rupley  V.  Daggett.  74  111.  351  I,  115 

Russell  V.  Easterbrook.  71  Conn.  50 II,  329 

Sabine  v.  Paine.  223  N.Y.  401  ,  II,     y2 

St.  Clair  v.  Rutledge.  115  Wis.  583 II,  373 

St.  Louis,  etc.,  Railroad  Co.  v.  Terre  Haute,  etc.,  Rail- 
road Co.  145  U.S.  393 II,  312 

St.  Martin  and  Co.  v.  Thrasher.  40  Vt.  460 II,  209 

Salinas  &  Son  v.  Ellis.  26  S.C.  337  I,  249 

Salt  Lake  City  Brewing  Co.  v.  Hawke  &  Andrews.  24 

Ut.  199  II,  203 

Salt  Springs  National  Bank  v.  Burton.  58  N.Y.  430  ...  II,  loi 

Sahus  &  Sahus  v.  Everett.  20  Wend.   (N.Y.)  267  I,  349 

Samstag  and  Hiider  Brothers  v.  Ottenheimer.  90  Conn. 

475   II.  164 

Sawyer  v.  Long.  86  Me.  541  I,  330 

Sceva  V.  True.  53  N.H.  627 I,  102 

Schnell  v.  Nell.  17  Ind.  29 I,     61 

Scovill  V.  Thayer.  105  U.S.  143 II,  343 

Scuddcr  v.  Worster.  11  Cush.  (Mass.)  573 I,  335 

Scavcr  v.  Phelps.  1 1  Pick.  (Mass.)  304 I,  104 


TABLE    OF    CASES  519 


Seaver  v.  Ransom.  224  N.Y.  233 I 

Second  National  Bank  of  Mechanicsburg  v.  Graham.  246 

Pa.  256 I 

Seufert  v.  Gille,  230  Mo.  453   I 

Shaw  V.  Railroad  Company.  loi  U.S.  557 

Shea  V.  Parker.  234  Mass.  592 I 

Sherrod  v.  Mayo,  Adm.  156  N.C.  144 I 

Shindler  v.  Houston,  i  N.Y,  261   

Shoninger  v.  Peabody.  57  Conn.  42  

Shuey  v.  United  States.  92  U.S.  73 

Siler,  Adm'r.  v.  Gray,  Adm'r.  86  N.C.  566 

Silsbee  v.  Webber.  171  Mass.  378 

Silver  v.  Graves.  210  Mass.  26 

Simpson  v.  Del  Hoyo.  94  N.Y.  189 

Simpson  v.  Prudential  Insurance  Co.  184  Mass.  348  .  . . 

Sisson  V.  Donnelly.  36  N.J.L.  432  

Slayton  v.  Barry.  175  Mass.  513 

Smathers  &  Co.  v.  Toxaway  Hotel  Co.  162  N.C.  346  . . 

Smilie  v.  Stevens.  39  Vt.  315 

Smith  v.  Brady.  17  N.Y.  173 

Smith  V.  Hurd.  12  Mete.  (Mass.)  371 

Smith  V.  Poillon.  87  N.Y.  590 

Smith  V.  Western  Union  Telegraph  Co.  84  Ky.  664  .... 

Smith  V.  Wheatcroft.  L.R.  9  Ch.  D.  (Eng.)  223 

Snyder  v.  Corn  Exchange  National  Bank.  221  Pa.  599  . 

Society  Perun  v.  Cleveland.  43  Oh.  St.  481  , 

Southern  Development  Co.  v.  Silva.  125  U.S.  247  .... 
Spring  v.  Slayden-Kirksey  Woolen  Mills.  106  111.  App. 

579 

Spurgeon  v.  Smitha.  1 14  Ind.  453  

Stanton  v.  Westover.  loi  N.Y.  265   

State  v.  Atlantic  City  &  Shore  Railroad  Co.  'J'J  N.J.L. 

465   

State  V.  Dawson.  16  Ind.  40 

State  of  Maine  v.  Chandler.  79  Me.  172 

Stephenson  v.  Dickson.  24  Pa.  St.  148 

Stevens  v.  Androscoggin  Water  Power  Co.  62  Me.  498 

Stevens  v.  Perry.  113  Mass.  380 , 

Stevens  v.  The  Rutland  &  Burlington  Railroad  Co.  29 

Vt  545  

Stevenson    &    Sons,    Ltd.    v.    Aktien-Gesellschaft    fiir 

Cartonnagen-Industrie.  (1916)  i  K.B.  (Eng.)  763 
Stewart  v.  Wyoming  Cattle  Ranche  Co.  128  U.S.  383 
Stokes  v.  Continental  Trust  Co.  186  N.Y.  285 


133 

228 

345 
336 
247 
301 
423 
23 
266 

143 
63 

359 
94 

201 

lOI 

67 

13 
241 

335 
118 
161 
116 
29 
288 
131 

319 
131 

244 

299 

273 

194 
123 
142 
214 

345 

231 

134 
332 


520  COMMERCIAL   LAW    CASES 

Strong  V.   The   Grand   Trunk   Railroad   Company.    15 

Mich.  206 I.  207 

Studdy  V.  Beesty  &  Higgins.  60  L.  T.  Rep.  (N.S.)  (Eng.) 

647 II,  121 

Summers  v.  Mills.  21  Tex.  '^'j ,  I,  275 

Sunshine  Cloak  and  Suit  Co.  v.  Roquette  Bros.  30  N. 

Dak.  143  I,  225 

Swenson  Brothers  Co.  v.  Commercial  State  Bank.  98 

Neb.  702  II,  149 

Swift  &  Company  v.  Miller.  62  Ind.  App.  312 ,11,     88 

Swift  V.  Pierce.  13  Allen  (Mass.)  136 >  I,     45 

Taft  V.  Schwamb.  80  111.  289 II,  192 

Tayloe  v.  The  Merchants'  Fire  Insurance  Co.  9  How. 

(U.S.)  390 I. 

Taylor  v.  Barton  Child  Co.  228  Mass.  126 ,     I, 

Taylor  &  Farley  Organ  Co.  v.  Starkey.  59  N.H.  142  ..  I, 

Tennant  v.  Dunlop.  97  Va.  234 II, 

Terre  Haute  &  Indianapolis  Railroad  Company  v.  Mc- 

Murray.  98  Ind.  358 •  I, 

Thayer  v.  Goss.  91  Wis.  90 II, 

Thayer  v.  Humphrey.  91  Wis.  276 II, 

Thomas  v.  Atherton.  L.R.  10  Ch.  D.  (Eng.)  185 II, 

Thomas  v.  Dakin.  22  Wend.  (N.Y.)  9 ,  II, 

Thompson  v.  Sloan.  23  Wend.  (N.Y.)  71 ,  II, 

Thorne  v.  Deas.  4  Johns.  (N.Y.)  84  -  I, 

Times  Square  Automobile  Company  v.  Rutherford  Na- 
tional Bank,  yj  N.J.L.  649 ,  II, 

Tisher  v.  Beckwith.  30  Wis.  55 I, 

Topliff  V.  Topliff.  122  U.S.  121   ,  I, 

Town  of  Essex  v.  Day.  52  Conn.  483 I, 

Trenholm  v.  Miles.  102  Miss.  835 I, 

Triphonoff  v.  Sweeney.  65  Ore.  299 II, 

Trustees  of  Carrick  Academy  v.  Clark.  112  Tenn.  483  ...  II, 
Trustees  of  Dartmouth  College  v.  Woodward.  4  Wheat. 

(U.S.)  518 ,  II, 

Trustees  of  the  Free  Schools  in  Andover  v.  Flint.  13 

Mete.  (Mass.)  539  II, 

Tupper  V.  Cadwell.  12  Mete.  (Mass.)  559 I, 

Turner  V.  Goldsmith.  (1891)  i  Q.B.  (Eng.)  544 I, 

Union  Stock-Yards  and  Transit  Co.  v.  Western  Land 

and  Cattle  Co.,  Ltd.  59  Fed.  49 I, 

United  States  v.  John  Kelso  Co.  86  Fed.  304 11, 

United  States  Steel  Corporation  v.  Hodge.  64  N.J.E. 

807 II, 

Valbert  v.  Valbert.  282  111.  415 I, 


TABLE    OF    CASES  52 I 


Van  Brocklen  v.  Smeallie.  140  N.Y.  70 

Van  Buskirk  v.  State  Bank  of  Rocky  Ford.  35  Col.  142.    I 

Varney  v.  Ditmars.  217  N.Y.  223   

Vaughan  v.  Porter.  16  Vt.  267 

Vawter  v.  Griffin.  40  Ind.  593 

Visalia  &  Tulare  Railroad  Co.  v.  Hyde,  no  Cal.  632  ...    I 

Voris  V.  Schoonover.  91  Kas.  530   I 

Vulcan  Metals  Co.  v.  Simmons  Mfg.  Co.  248  Fed.  853.  .. 

Walker  v.  Stetson.  14  Oh.  St.  89  I 

Walti  V.  Gaba.  160  Cal.  324 

Warner  v.  Texas  &  Pacific  Railway  Co.  164  U.S.  418  ... 

Weber  v.  Bridgman.  1 13  N.Y.  600  

Weld  V.  Cutler.  2  Gray  (Mass.)   195  

Wells  V.  Cook.  16  Oh.  St.  67 

Welsh  V.  The  Village  of  Rutland.  56  Vt.  228 : 

Westinghouse  Electric  and  Manufacturing  Co.  v.  Hodge. 

181  Mo.  App.  232 I 

Wettlaufer  v.  Baxter.  137  Ky,  362 I 

Wheatley  v.  Strobe  and  Wilcoxson.  12  Cal.  92 I 

Wheaton  Building  and  Lumber  Co.  v.  City  of  Boston. 

204  Mass.  218 

Whitcomb  v.  Converse.  1 19  Mass.  38 I 

Whitcomb  v.  The  National  Exchange  Bank  of  Baltimore. 

123  Md.  612 I 

White  V.   Corlies.  46  N.Y.  467 

White  V.  Duggan.  140  Mass.  18 , 

White  V.  Kuntz.  107  N.Y.  518  

Whiteford  v.  Burckmyer.  i  Gill  (Md.)   127 ,  I 

Whiteside  v.  United  States.  93  U.S.  247 , 

Whittaker  Chain  Tread  Co.  v.  Standard  Auto  Supply 

Co.  216  Mass.  204 

Wigton  V.  Bowley.  130  Mass.  252 

Wilbour  V.  Hawkins.  38  R.I.  116 I 

Williams  v.  Johnson.  208  Mass.  544 I 

Wilson  V.  Hendee.  74  N.J.L.  640  4  I 

Wilson  V.  Senier.  14  Wis.  380 I 

Wilson  V.  Wilson.  26  Ore.  251 I 

Wisner  v.  The  First  National  Bank  of  Gallitzin.  220 

Pa.  21    I 

Witbeck  v.  Waine.  16  N.Y.  532 

Woburn  National  Bank  v.  Woods,  yy  N.H.  172 

Wolke  V.  Kuhne.  109  Ind.  313 I 

Wollenweber  v.  Ketterlinus.  17  Pa.  St.  389 I 

Wood  V.  Boynton.  64  Wis.  265 

Wood  V.  Macafee.  172  N.Y.S.  703 I 


,  381 

,  147 
,  20 
,  203 
.  277 
.  330 
.  27 
,  308 
.  115 
,  274 
,  52 
.  497 

>  336 
,  136 
.  468 

,  123 
,  24 
,  45 

,  114 

,  264 

,  134 
,  25 
,  412 
,  69 
,  116 
,  460 

,  66 
.  338 
,  38 

>  297 
,  80 
,  103 
,  224 

,  148 
,  264 
,  112 

,  74 
,  121 
,  122 
,  256 


522  COMMERCIAL   LAW    CASES 

Wood  V.  Pugh,  Gano  &  Lee.  7  Oh.  501 II,  145 

Wood  V.  Steele.  6  Wall.  (U.S.)  80  I,  265 

Woodward-Holmes  Co.  v.  Nudd.  58  Minn.  236 II,  195 

Wooten  V.  Walters,  no  N.C.  251 I,  220 

Zavelo  V.  Reeves.  227  U.S.  625 I,  267 

Zimmerle  v.  Childers.  67  Ore.  465 I,  288 


STATUTES 

Mass.  Acts  and  Resolves,  1908,  c.  237,  §  19 I,  360 

Mass.  Acts  and  Resolves,  1908,  c.  237,  §  20 I,  361 

Mass.  Acts  and  Resolves,  1908,  c.  237,  §§  33-38 I,  362 

Mass.  Acts  and  Resolves,  1908,  c.  237,  §  60 I,  382 

Mass.  R.L.  c.  73,  §§  77,  78,  82,  83 11,    73 

Mass.  R.L.  c.  73,  §§  89-93,  99 II,    85 

Mass.  R.L.  c.  73,  §§  113,  120,  121,  124,  125,  130-132 II,  109 

Laws  of  New  York,  1919,  c.  408,  Art.  2,  §  11 II,  183 

Laws  of  New  York,  1919,  c.  408,  Art.  3,  §  20 II,  211 

Laws  of  New  York,  1919,  c.  408,  Art.  6,  §  62 II,  233 

Laws  of  New  York,  1919,  c.  408,  Art.  6.  §  71 II,  265 

Mass.  Acts  and  Resolves,  1903,  c.  437,  §§  7-12 II,  277 

Mass.  Acts  and  Resolves,  1903,  c.  437,  §4 II,  318 

Mass.  Acts  and  Resolves,  1903,  c.  437,  §  14 II,  332 

Mass.  Acts  and  Resolves,  1903,  c.  437,  §§  33-35 H,  347 

Mass.  Acts  and  Resolves,  1903,  c.  437,  §  40 II,  365 

Mass.  Acts  and  Resolves,  1903,  c.  437,  §§  51-54 II,  380 


GLOSSARY 


abatement,  n.  a  reduction ;  plea  in  abatement,  a  pleading  by  the 
defendant  setting  forth  matters  of  fact  showing  the  writ 
or  declaration  to  be  defective  or  incorrect. 

ab  initio,  Lat.  phr.     from  the  beginning. 

abrogate,  v.     to  abolish,  repeal  or  destroy. 

ad  infinitum,  Lat.  phr.     without  limit. 

adjudication,  n.  the  giving  of  a  judgment  in  a  cause;  also  the 
judgment  given. 

administrator,  n.  a  man  appointed  by  the  probate  court  to  man- 
age the  estate  of  a  deceased  person,  generally  in  the  absence 
of  testamentary  disposition,     fem.,  administratrix. 

admiralty,  n.    that  body  of  law  administered  in  maritime  affairs. 

ad  valorem,  Lat.  phr.     according  to  value. 

ccquali  jure,  Lat.  phr.     with  equal  right. 

affidavit,  n.     sworn  statement. 

agister  (or),  n.     one  who  takes  animals  to  pasture  for  hire. 

allegation,  n.  an  assertion  by  a  party  to  an  action  in  his  pleading 
therein. 

alter  ego,  Lat.  phr.     other  self. 

ancillary,  adj.     auxiliary;  aiding. 

oniniadversion,  n.     censure. 

anomalous,  adj.     unusual;  not  conforming  to  rule. 

antecedent,  n.     that  which  goes  before,     adj.  foregoing. 

a  posteriori,  Lat.  phr.  proceeding  by  induction  from  the  effect 
to  the  cause. 

apparent,  adj.     obvious. 

appellant,  ii.    that  party  who  takes  an  appeal  from  a  judgment. 

appellate  court,  n.  phr.     court  by  which  appeals  are  heard. 

appellee,  n.  that  party  against  whom  an  appeal  from  a  judgment 
is   taken. 

a  priori,  Lat.  phr.  proceeding  by  deduction  from  the  cause  to 
the  effect. 

assets,  n.     property  applicable  to  the  payment  of  obligations. 

assignee,  n.     one  to  whom  an  assignment  is  made. 

assignment,  n.     an  act  or  instrument  of  transfer. 

assignor,  n.     one  who  makes  an  assignment. 

523 


524  COMMERCIAL   LAW    CASES 

assumpsit,  Lat.    an  action  at  law  brought  upon  a  promise  not 

under  seal. 
assured,  n,  or  v.    insured. 
autonomous,  adj.     self-governing. 
aver,  v.    to  allege. 
averment,  n.    allegation. 
avoidance,  n.    annulment  by  evasion. 

B 

bailee,  n.  party  to  vi^hom  personal  property  is  delivered  under  a 
contract  of  bailment. 

bailor,  n.  party  who  delivers  personal  property  under  a  contract 
of  bailment. 

bailment,  n.  delivery  of  personal  property  to  another  for  the  ex- 
ecution of  a  special  object  or  purpose. 

bankrupt,  n.  one  by  or  against  whom  a  petition  in  bankruptcy 
has  been  filed ;  a  person,  generally  insolvent,  whose  financial 
condition  makes  him  liable  to  action  by  his  creditors  for  the 
seizure  and  distribution  among  them  of  his  property. 

bankruptcy,  n.     the  state  or  condition  of  one  who  is  bankrupt. 

barter,  n.  a  contract  by  which  parties  exchange  goods  or  com- 
modities for  other  goods  or  commodities. 

beneficiary,  n.  person  entitled  to  the  enjoyment  of  property  of 
which  another  has  the  legal  possession. 

bilateral  (contract),  adj.  a  contract  in  which  the  obligation  exists 
on  both  sides. 

bill  of  lading,  n.  phr.  the  written  evidence  of  a  contract  for  the 
carriage  or  delivery  of  goods,  issued  by  the  carrier. 

book  account,  n.  phr.  a  statement  of  debits  and  credits  between 
contracting  parties,  kept  in  a  book. 

bond,  n.  an  instrument  under  seal  conditioned  upon  the  perform- 
ance of  or  forbearance  from  an  act. 

breach  (of  contract),  n.  failure  to  fulfill  the  obligations  of  a 
contract. 

brief,  n.  a  summary  of  arguments  and  authorities  presented  to 
the  court  by  counsel  in  the  hearing  of  a  case. 

broker,  n.  an  agent  employed  to  make  a  bargain  between  buyer 
and  seller. 

by-lazvs,  n.  regulations  adopted  by  a  corporation  or  municipality 
for  its  government. 


canon,  n.     a  law  or  ordinance,  generally  of  the  church. 

capital  (of  corporation),  n.     the  aggregate  of  the  sum  subscribed 


GLOSSARY  -  525 

or  paid  in  by  shareholders  to  be  used  in  the  business  of  a 
corporation,  as  increased  or  decreased  by  subsequent  opera- 
tions. 

capital  stock,  n.  phr.  that  sum  of  money  raised  by  subscriptions 
of  stockholders  of  a  corporation,  or  other  property  of  a  cor- 
poration, which  is  represented  by  shares. 

casus,  Lat.  n.    event  or  outcome ;  case. 

casus  foederis,  Lat.  phr.  contingency  contemplated  by  an  agree- 
ment. 

cestui  que  trust,  Lat.  phr.  the  owner  of  a  beneficial  interest  in 
property,  legal  title  to  which  is  in  another. 

chattel,  n.     article  of  personal  property. 

chose  in  action,  n.  phr.  right  to  recover  possession  or  damages 
by  legal  process ;  right  to  enforce  a  claim  or  demand  by  legal 
process. 

civil  latv,  n.  phr.     the  Roman  law  and  its  derivatives. 

civiliter  mortuus,  Lat.  phr.     dead  in  contemplation  of  the  law. 

claimant,  n.     person  who  makes  a  claim. 

codicil,  n.     instrument  supplementing  the  terms  of  a  will. 

coerce,  v.     compel. 

coeval,  adj.     contemporaneous. 

collateral,  adj.     existing  side  by  side. 

comity,  n.  deference  with  which  one  jurisdiction  treats  the  acts 
of  another. 

common  laiv,  n.  phr.  that  body  of  unwritten  law  which  has  its 
source  in  usages  and  customs  of  immemorial  antiquity. 

composition  (with  creditors) ,  n.  agreement  between  a  debtor  and 
his  creditors  for  the  discharge  of  their  claims,  generally  at 
less  than  their  face  value. 

concur,  v.     to  agree. 

concurrent,  adj.     co-existing;  running  along  with. 

conjunctive,  adj.     serving  to  unite. 

consideration  (of  contract),  the  benefit  to  the  promisor  or  the 
detriment  to  the  promisee  which  gives  binding  force  to  the 
contract. 

consign,  v.  to  deliver  goods  to  a  carrier  to  be  transported  to  a 
named  individual. 

consignee,  n.     one  to  whom  goods  are  consigned. 

consignment,  n.  act  of  consigning  goods;  also  used  to  indicate 
the  goods  consigned. 

consignor,  n.     one  who  consigns  goods. 

contravention,  n.     violation. 

conversion,  n.  unauthorized  act  of  dominion  over  personal  prop- 
erty of  another. 


526  COMMERCIAL    LAW    CASES 

conveyance,  n.  an  instrument  under  seal  by  which  an  estate  in 
land  is  created. 

copartnership,  n.     partnership. 

corporate,  adj.     pertaining  to  a  corporation. 

corpus,  Lat.  n.     body. 

co-surety,  n.     joint  surety. 

court  of  chancery,  n.  phr.     court  of  equity. 

court  of  equity,  n.  phr.  court  administering  the  law  of  equity,  as 
distinguished  from  the  common  law. 

covenant,  n.  a  promissory  warranty  contained  in  a  sealed  instru- 
ment. 

covert,  adj.  protected;  term  used  to  describe  the  status  of  a 
married  woman. 

coverture,  n.     the  status  of  a  married  woman. 

crassa  negligentia,  Lat.  phr.     gross  negligence, 

cum  onere,  Lat.  phr.     with  the  burden. 

cumulative  voting,  n.  phr.  system  of  voting  by  which  the  elector, 
having  a  number  of  votes  equal  to  the  number  of  officers  to 
be  chosen,  is  allowed  to  use  all  his  votes  for  one  person,  or 
to  distribute  them  as  he  sees  fit. 

curtesy,  n.  that  life  estate  in  lands  of  his  late  wife  to  which  a 
surviving  husband  is  entitled  by  the  common  law.  The  right 
formerly  existed  only  in  event  that  children  were  born  of 
the  marriage. 


damages,  n.     pecuniary  compensation  for  injury  or  loss. 
damnujn  absque  injuria,  Lat.  phr.     wrong  for  which  there  is  no 

legal  redress.     Literally,  loss  without  legal  injury. 
debitum,  Lat.  n.     debt ;  something  owed. 

deceit,  n.     technically,  an  action  of  tort  for  a  fraudulent  misrep- 
resentation. 
declaration  of  trust,  n.  phr.     act  or  instrument  whereby  a  trust 

is  created. 
deed,  n.     instrument  by  which  one  person  conveys  an  interest 

in  land  to  another. 
de  facto,  Lat.  phr.     in  fact ;  actually. 
defamation,   n.     slanderous   or   libelous   statements   injurious   to 

reputation. 
default,  n.     omission  or  failure  to  fulfill  a  duty. 
defeasible,  adj.     subject   to  annulment. 
defendant,  n.     j)arty  against  whom  an  action  is  brought. 
defendant  in  error,  n.  phr.     party  against  whom  an  appeal  is  taken 

by  writ  of  error,  a  technical  method  of  removal  to  a  higher 

court. 


GLOSSARY  527 

dehors,  prep,     outside ;  foreign  to. 

delectus  personarum,  Lat.  phr.     choice  of  persons. 

delegate,  v.     to  commit  the  management  of  an  affair  to  another. 

delivery,  n.     the  act  of  transfer  of  a  sealed  or  other  instrument 

or  property  to  another. 
demise,  v.     to  lease  or  convey,    n.  lease  or  conveyance,  originally, 

to  take  effect  after  death ;  also  a  synonym  for  death. 
detinue,  n.     a  form  of  action  for  the  recovery,  in  specie,  of  per- 
sonal property  from  one  who  has  acquired  possession  of  it 

lawfully  but  retains  it  without  right. 
detriment,  n.     loss  or  harm. 
devise,  n.     gift  of  real  property  by  will. 
dictum,  Lat.  n.     statement,     obiter  dictum,  Lat.  phr.     collateral 

statement ;  statement  contained  in  an  opinion  which  is  not 

necessary  to  decision  of  the  case. 
dishonor,  v.     to  decline  to  accept  a  bill  of  exchange  or  neglect 

to  pay  a  negotiable  instrument  at  maturity. 
disjunctive ,  adj.     in  the  alternative. 
disseisin,  n.     dispossession. 
dissolution,  n.     breaking  up. 

divestiture,  n.     termination ;  the  taking  away  of  a  right  or  power. 
dock  zvarrant,  n.     certificate  of  ownership  of  goods,  given  by  the 

owner  of  the  dock  on  which  they  are  stored. 
doctrine  of  causation,  n.  phr.     that  theory  whereby  the  law  limits 

legal  liability  to  proximate  results. 
domicile,  n.     that  place  where  a  person  has  or  makes  his  home. 
donee,  n.     one  to  whom  a  gift  is  made. 
donor,  n.     one  who  makes  a  gift. 
dormant,  adj.     sleeping;  inactive. 
dower,  n.     that  life  estate  in  lands  of  her  late  husband,  to  which 

a  widow  is  entitled  at  common  law. 
draft,  n.     order  for  the  payment  of  money. 
drawee,  n.     person  on  whom  an  order  for  the  payment  of  money 

is  drawn. 
drawer,   n.     person   who   draws   an   order    for   the   payment   of 

money. 
duress,  n.     unlawful  constaint  whereby  a  person  is  forced  to  do 

an  act  against  his  will. 


earnest,  n.     money  given  to  bind  a  bargain. 
eleemosynary,  adj.     charitable. 

eminent  domain,  n.  phr.     the  right  of  a  sovereign  to  take  private 
property  for  public  use. 


5^8  COMMERCIAL    LAW    CASES 

entity,  n.     that  which  has  an  independent  existence. 

equitable,  adj.     of  or  pertaining  to  equity. 

equity,  n.  that  system  of  law  having  its  source  in  the  rulings  of 
the  chancellors,  and  applying  the  legal  principles  evolved  by 
them. 

escrow,  (delivery  in),  n.  delivery  to  a  third  person  to  hold  pend- 
ing the  occurrence  of  a  contingency. 

essence,  n.     that  which  is  indispensable. 

estoppel,  n.  a  bar  raised  by  the  law  on  account  of  a  person's  prior 
conduct  to  preclude  him  from  changing  his  legal  position  to 
the  detriment  of  one  who  has  rightfully  relied  on  such  prior 
conduct. 

et  al.,  Lat.  phr.     (abb.  from  ct  alius)  and  another. 

ex,  Lat.  prep,     out  of,  from. 

ex  cequo  et  bono,  Lat.  phr.     in  justice  and  fairness. 

ex  contractu,  Lat.  phr.     arising  from  a  contract. 

execution,  n.  carrying  into  effect ;  also  used  to  indicate  an  order 
of  the  court  directing  the  enforcement  of  its  judgment. 

executor,  n.  a  person  named  by  the  maker  of  a  will  and  appointed 
by  the  probate  court  to  carry  out  its  provisions,  fern.,  ex- 
ecutrix. 

ex  facie,  Lat.  phr.     apparent  on  the  surface. 

ex  parte,  Lat.  phr.     by  or  for  one  party  only. 

express,  adj.     explicit:  not  left  to  inference  or  implication. 

ex  turpi  causa,  Lat.  phr.  arising  out  of  an  illegal  and  iniquitous 
state  of  facts. 


fee,  n.     absolute  ownership  (of  land). 

felony,  n.     crime  punishable  by  death  or  imprisonment  in  state's 

prison. 
feme  sole,  Nor.  Fr.  phr.     unmarried  woman. 
fiduciary,  n.     person  in  a  relationship  of  trust,    adj.  in  the  nature 

of  a  trust. 
fi.  fa.  (fieri  facias),  Lat.  phr.     writ  of  execution  commanding  a 

sheriff  to  levy  upon  property  belonging  to  a  judgment  debtor. 
foreign  corporation,  n.  phr.     corporation  created  by  the  law  of 

another  jurisdiction. 
a  fortiori,  Lat.  phr.     all  the  more  so ;  by  a  stronger  reason. 
franchise,   n.     a   special   ]M-ivilege  conferred  by  a  governmental 

body  upon  an  individual  or  corporation. 
freehold,  n.     an  estate  in  land  in  fee  or  for  life. 
functus  officio,  T>at.  phr.     having  fulfilled  the  purpose. 
futures,  n.     oi)tions,  giving  the  holder  a  right  to  rcfjuire  <lelivery 

at  a  future  time,  no  actual   delivery  being,  as  a  rule,  con- 
templated. 


GLOSSARY  529 

G 

gaming,  n.     gambling. 

good  will,  n.  phr.  the  benefit  accruing  to  an  established  business 
from  the  likeHhood  that  customers  will  continue  to  resort 
thereto. 

grant,  n.     transfer  of  title,  generally  to  real  property. 

grantee,  n.     person  to  whom  a  grant  is  made. 

grantor,  n.     person  who  makes  a  grant. 

gratuity,  n.     gift. 

guarantee,  v.  to  promise  to  answer  for  the  fulfilment  of  an 
obligation  of  another. 

guaranty,  n.  promise  to  answer  for  the  fulfilment  of  an  obliga- 
tion of  another. 

H 

hypothecate,  v.  to  make  a  contract  of  mortgage  or  pledge  with- 
out delivery  of  the  article  mortgaged  or  pledged,  n.  hypothe- 
cation. 


ignorantia  legis  ncminen  excusat,  Lat.  phr.  ignorance  of  the  law 
excuses  no  one. 

ipso  facto,  Lat.  phr.     by  the  fact  itself. 

implead,  v.  to  j'oin  as  defendant  in  a  legal  action,  generally 
criminal. 

implied,  adj.     understood;  not  expressed. 

impugn,  v.     to  confute;  to  discredit. 

inception,  n.     beginning. 

incompetent,  adj.     unfit,     n.  incompetency. 

incorporate,  v.     to  form  a  corporation. 

indemnify,  v.    to  secure  against  loss  or  damage. 

indemnity,  n.     compensation  to  one  indemnified. 

indicia,  Lat.  pi.  n.     indications. 

indorsement,  n.  the  act  of  a  party  in  writing  his  name  upon  the 
back  of  a  negotiable  instrument,  whereby  the  property 
therein  is  transferred  to  another,  indorsement,  (accom- 
modation), the  indorsement  of  a  negotiable  instrument  by  a 
third  party  for  the  purpose  of  lending  his  credit  to  a  party 
thereto. 

in  hcec  verba,  Lat.  phr.     in  these  words. 

injunction,  n.  order  issuing  from  a  court  of  equity  requiring  a 
person  to  do  or  refrain  from  doing  a  particular  act. 

in  pais,  fact  in  pais).  Nor.  Fr.  an  act  which  takes  place  without 
legal  proceedings ;  a  transaction  which  is  neither  a  matter  of 
record  nor  under  seal. 


530  COMMERCIAL    LAW    CASES 

in  pari  delicto,  Lat.  phr.  equally  in  the  wrong.  In  pari  delicto 
potior  est  conditio  dcfendcntis,  Lat.  phr.  where  each  party 
is  equally  at  fault,  the  situation  of  the  defendant  is  the 
stronger. 

in  personam,  Lat.  phr,     against  the  person. 

in  re,  Lat.  phr.     in  the  matter  of. 

in  rem,  Lat.  phr.     against  the  thing. 

insolvency,  n.  the  condition  of  one,  the  amount  of  whose  liabili- 
ties exceeds  the  value  of  his  assets. 

instrument,  n.     legal  document. 

inter  sese,  Lat.  phr.     among  themselves. 

intestate,  adj.  leaving  no  will.  n.  a  person  who  dies  leaving  no 
will. 

in  toto,  Lat.  phr.     completely. 


joint,  adj.     participated  in  by  two  or  more  as  a  unit, 

joint  and  several,  adj.  phr.  participated  in  by  two  or  more,  both 
as  a  unit  and  separately. 

joint  stock  company,  n.  phr.  a  business  organization,  having  in 
many  respects  the  form  of  a  corporation,  but  the  legal  effect 
of  a  partnership. 

judgment,  n.     decision  of  a  court. 

judicial  sale,  n.  phr.  sale  ordered  and  carried  through  under  au- 
thority of  a  court. 

jurisdiction,  n.     power  to  hear  and  determine. 

jus  disponendi,  Lat.  phr.     right  of  disposal. 


laches,  n.  omission  ;  negligent  omission  to  take  appropriate  action 
for  the  enforcement  of  one's  rights. 

latent  defect,  n.  phr.  defect  not  readily  discoverable  upon  inspec- 
tion, 

lease,  n,  instrument  under  seal,  transferring  the  right  to  pos- 
.session  of  real  or  personal  property,  without  transfer  of 
the  title. 

lessee,  n.     one  to  whom  a  lease  is  made. 

lessor,  n.     one  who  makes  a  lease. 

letters  testamentary,  n.  phr.  the  formal  appointment  of  an  ex- 
ecutor by  a  probate  court. 

levy,  n.  the  act  of  a  sheriff  in  seizing  property  to  satisfy  an 
execution. 

lex  mcrcatoria,  Lat.  ])hr.  the  law  merchant;  that  body  of  law 
founded  upon  the  customs  of  the  merchants  in  vogue  during 


GLOSSARY  531 

the   IVIiddle   Ages   upon   the   Continent   of    Europe   and    in 

England. 
lex  loci  rci  sitcc,  Lat.  phr.     law  of  the  place  where  a  thing  is. 
lihcl,  n.     written  defamation ;  also  a  written  statement   of   the 

plaintiff's  case  in  divorce  or  admiralty  proceedings. 
license,  n.     permit  granted  l)y  projicr  authority. 
lien,  n.     a  right  to  hold  the  property  of  another  as  security  for 

the  enforcement  of  a  claim. 
life  estate,  n.  phr.     an  interest  in  real   property,  terminating  at 

the  death  of  the  owner  or  another. 
limited  partnership,  n.  phr.     form  of  partnership,  authorized  by 

statute,  whereby  the  liability  of  the  partners  is  limited. 
locus  pocnitentice,  Lat.  phr.     opportunity  for  reconsideration. 
locus  sigilli,  Lat.  phr.    the  place  of  the  seal. 

M 

mala  fides,  Lat.  phr.     bad  faith. 

malfeasance,  n.  wrongful  or  unjust  doing  of  an  act  which  the 
doer  has  ■no  right  to  do. 

malum  in  se,  Lat.  phr.     act  inherently  wrong. 

malum  prohibitum,  Lat.  phr.  act  prohibited  by  statute,  pi. 
mala  prohibita. 

mandamus  (writ  of),  a  writ  ordering  the  doing  of  a  minister "al 
act  by  the  defendant, 

mandate,  n.  contract  by  which  the  management  of  a  business  is 
committed  to  another. 

mandatory,  n.  one  to  whom  a  mandate  is  given,  adj.  peremp- 
tory. 

marital,  adj.     pertaining  to  the  marriage  relation. 

market  overt,  n.  phr.     public  market. 

marshalling,  part,     ranking  in  order. 

maxim,  n.     principle  of  law  universally  admitted. 

merger,  n.     fusion  of  one  right  in  another. 

misfeasance,  n.  improper  performance  of  an  act  which  the  doer 
may  lawfully  do. 

moiety,  n.     half. 

mortgage,  n.  a  conveyance  of  real  or  personal  property,  whereby 
the  legal  title  or,  in  some  states,  a  lien  thereon,  is  conveyed 
as  security  subject  to  avoidance  upon  performance  of  the 
condition  named  in  the  instrument. 

mortgagee,  n.     one  to  whom  a  mortgage  is  given. 

mortgagor,  n.     one  who  gives  a  mortgage. 

mutuality,  n.     reciprocity  of  rights. 


532  COMMERCIAL   LAW    CASES 

N 

negligence,  n.  failure  to  exercise  the  care  required  by  law  under 
the  circumstances. 

negotiability,  n.  that  quality  of  checks,  bills  of  exchange  and' 
promissory  notes  which  makes  them  transferable  from  one 
person  to  another  by  indorsement  and  delivery,  or  by  deliv- 
ery only. 

negotiable,  adj.     having  the  attribute  of  negotiability. 

negotium,  Lat.  n.     business. 

net  profit,  n.  phr.  gain  accruing  on  investment,  after  deduc- 
tion of  losses  and  expenses. 

nisi  prius  (court),  Lat.  phr.     court  of  first  instance. 

nominal  value,  n.  phr.  artificial  value;  value  existing  in  name 
only. 

nonfeasance,  n.     failure  to  perform  an  act. 

non-joinder,  n.     omission  to  join  a  person  as  a  party, 

nonperformance,  n.     failure  to  perform. 

notary,  n.  a  public  officer  whose  function  it  is  to  attest  certain 
classes  of  legal  documents. 

novation,  n.  substitution  of  a  new  contractual  obligation  for  an- 
other. 

noxal  action,  n.  phr.  action  for  damages  done  by  slaves  or  ir- 
rational animals. 

nnduin  pactum,  Lat.  phr.     an  undertaking  without  consideration. 

nugatory,  adj.     ineffectual. 


obiter  dictum,    see  dictum. 

obligation,  n.     duty  to  do  or  to  forbear  from  doing. 

obligee,  n.     one  in  favor  of  whom  an  obligation  is  contracted. 

obligor,  n.     one  upon  whom  an  obligation  rests. 

offeree,  n.     one  to  whom  an  offer  is  made. 

offeror,  n.     one  who  makes  an  offer. 

omnis  rafihabitio  rctrofrahitur,  Lat.  phr.  every  ratification  re- 
lates back. 

option,  n.  right  to  purchase  or  sell  at  the  election  of  the  holder 
of  the  option. 

ostensible,  adj.     apparent. 

overt,  adj.     open. 

P 

pari  passu,  Lat.  phr.     with  equal  step;  equally. 

parity,  n,     equality. 

parliceps  criminis,  Lat.  phr.     accessory  to  a  crime. 


GLOSSARY  533 

par  value,  n.  phr.     face  value  (of  a  security). 

patent  defect,  n.  phr.-    defect  readily  discoverable  upon  inspection. 

penal,  adj.     pertaining  to  punishment. 

perjury,  n.     the  giving  of  wilfully  false  testimony  under  oath, 

per  my  ct  per  tout.  Nor.  Fr.  phr.  by  the  half  and  by  the  whole; 
the  tenure  of  joint  tenants. 

perpetuity,  (rule  against),  n.  phr.  that  provision  of  the  law  which 
requires  an  estate  to  vest  within  the  duration  of  a  life  in 
being  and  twenty-one  years  thereafter. 

per  se,  Lat.  phr.     by  itself ;  actually. 

plaintiff  in  error,  n.  phr.  one  who  takes  an  appeal  by  writ  of 
error.    See  defendant  in  error. 

plat,  n.     map. 

pleading,  n.     formal  statement  of  allegations  filed  in  an  action. 

pooling,  n.  an  agreement  between  competitors  for  the  joint  opera- 
tion of  their  business,  or  for  a  pro  rata  distribution  of  their 
profits. 

positive  lazv,  n.  phr.     law  authoritatively  imposed. 

precedent,  n.  adjudication  having  the  force  of  authority  in  simi- 
lar cases,  adj.  going  before,  condition  precedent,  n.  phr.  a 
condition  upon  the  occurrence  of  which  an  obligation  be- 
comes enforceable. 

preference,  n.  advantage  which  one  creditor  obtains  over  an- 
other creditor  in  connection  with  the  satisfaction  of  his 
claims  from  the  property  of  a  bankrupt. 

privy,  n.  one  having  a  mutual  interest  in  the  same  subject  mat- 
ter with  another,    adj.,  having  a  mutual  interest. 

privity,  n.     mutuality  of  interest. 

probate,  adj.  pertaining  to  the  administration  of  the  estate  or 
will  of  a  deceased  person,  probate  court,  n.  phr.  court  having 
jurisdiction  over  probate  matters. 

pro  rata,  Lat.  phr.     proportionately. 

prosecution,  n.  proceedings  brought  by  the  sovereign  for  punish- 
ment of  a  crime. 

pro  tanto,  Lat.  phr.     to  that  extent. 


qua,  Lat.  pron.     considered  as. 

quantum  meruit,  Lat.  phr.  as  much  as  it  deserved;  used  to  in- 
dicate a  form  of  action  in  which  the  plaintiff  seeks  to  recover 
the  value  of  services  rendered. 

quantum  valebant,  Lat.  phr.  as  much  as  they  were  worth;  used 
to  indicate  a  form  of  action  in  which  the  plaintiff  seeks  to 
recover  the  value  of  materials  furnished. 


534  COMMERCIAL    LAW    CASES 

quasi  contract,  n.  phr.     a  form  of  obligation  analogous  to  that  of 

contract  in  which  the  element  of  agreement  is  supplied  by 

law. 
quasi  public,  adj.  phr,     as  if  public;  having  public  functions. 
qui  facit  per  oliuni  facit  per  se,  Lat.  phr.     he  who  acts  through 

another,  acts  himself. 
quoad,  Lat.  conj.     as  to. 
quo  zvarranto,  Lat.  phr.     a  proceeding  by  a  sovereign  to  inquire  by 

what  authority  an  alleged  right  is  exercised, 

R 

ratification,  n.     adoption  of  the  act  of  another  as  one's  own, 

realty,  n.     real  estate, 

recoup,  V,     to  offset, 

recourse,  (indorsement  witJiout),  n.  that  form  of  indorsement 
whereby  the  indorser  signifies  his  refusal  to  assume  responsi- 
bility for  the  payment  of  a  negotiable  instrument. 

referee,  n.  an  officer  appointed  by  the  court  for  the  hearing  of 
a  case. 

remainderman,  n.  phr.  one  having  a  right  to  land  upon  the 
termination  of  a  prior  estate. 

replevy,  v.  to  bring  an  action  (known  as  replevin)  to  recover 
possession  of  personal  property  unlawfully  detained. 

repudiate,  v.     to  reject. 

res,  Lat.  n.     thing. 

resile,  v.     to  withdraw. 

rescission,  n.     abrogation. 

respondeat  superior,  Lat.  phr.     let  the  master  answer. 

respondent,  n.     defendant  in  an  equity  case. 


scienter,  adv.  knowingly ;  often  used  as  a  noun  to  indicate 
knowledge. 

seal,  n.  an  impression  upon  wax  or  other  substance  used  in  cer- 
tain forms  of  instruments  to  indicate  the  solemn  assent  of  a 
party  thereto.  At  the  present  time,  the  seal  may,  in  many 
jurisdictions,  be  no  more  than  a  scroll. 

seised  (seised),  p.p.     possessed. 

service  of  process,  n.  i)hr.  delivery  of  a  writ  or  other  legal  docu- 
ment by  an  authorized  person  for  the  purpose  of  giving  offi- 
cial notice. 

set-off,  (right  of),  n.  the  right  to  enforce  a  countervailing  claim 
against  the  other  party  to  a  suit. 


GLOSSARY  535 

simiil  cum,  Lat.  phr.  at  the  same  time  with ;  used  when  addi- 
tional parties  are  joined  in  an  action. 

simulacrum,  n.     image. 

socii,  Lat.     partners. 

solvent,  adj.     having  an  excess  of  assets  over  liabilities. 

specialty,  n.     a  contract  under  seal. 

specie,  (in),  adj.  phr.  in  coin;  as  applied  to  things,  used  to  in- 
dicate identity. 

specific  performance,  n.  phr.  literal  execution  of  the  terms  of 
a  contract  ordered  in  certain  cases  by  a  court  of  equity. 

stare  decisis,  (doctrine  of),  n.  phr.  that  theory  of  law  by  which 
courts  consider  themselves  bound  to  follow  precedents. 

statu  quo,  (in),  Lat.  phr.  in  the  condition  existing  at  a  fixed 
prior  time. 

statute,  n.      legislative  enactment. 

statute  of  frauds,  n.  phr.  that  statute,  originally  English,  which 
requires  certain  contracts  to  be  evidenced  in  a  specified  way, 
generally  in  writing. 

statute  of  limitations,  n.  phr.  that  statute  which  fixes  the  length 
of  time  within  which  suit  must  be  brought  upon  a  given 
cause  of  action. 

stoppage  in  transitu,  n.  phr.  the  act  by  which  an  unpaid  vendor 
stops  the  process  of  delivery  of  goods  and  resumes  posses- 
sion of  them. 

subsequent,  (condition),  adj.  a  condition  referring  to  a  future 
event,  upon  the  occurrence  of  which  a  contractual  obligation 
becomes  no  longer  binding  upon  a  party  who  chooses  to  avail 
himself  of  the  condition. 

substantive  lazv,  n.  phr.  that  body  of  law  which  creates,  defines 
and  regulates  rights ;  to  be  distinguished  from  adjective  law, 
which  prescribes  the  method  of  enforcing  rights. 

sui  generis,  Lat.  phr.     of  its  own  kind. 

sui  juris,  Lat.  phr.     of  legal  competency. 

suo  vigore,  Lat.  phr.     of  its  own  force. 

supra,  Lat.     above  referred  to ;  over,    supra  protest,  after  protest. 

surplusage,  n.      unnecessary  matter. 


tantamount,  adj.     equivalent. 

tender,  n.     ofTer  to  perform. 

terminum,  Lat.     limit ;  used  to  indicate  the  final  day,  upon  which 

a  defendant  must  appear  or  answer, 
testator,  n.     a  man  who  makes  a  will ;  fem.  testatrix, 
title  (to  property),  n.     general  ownership. 


536  COMMERCIAL    LAW    CASES 

tort,  n.     a  civil  wrong,  not  arising  out  of  a  breach  of  contract 

or  a  breach  of  trust. 
tortfeasor,  n.  phr.     one  who  commits  a  tort. 
tortious,  adj.     wrongfuL 
trespass,  n.     an  unjustified  invasion  of  the  rights  of  a  person, 

generally  to  property. 
trover,  n.     an  action  for  damages  arising  out  of  the  wrongful 

exercise  of  dominion  over  property  of  another, 
trust,  n.     a  holding  of  property  subject  to  a  duty  to  employ  it  or 

to  apply  its  proceeds  in  accordance  with  directions  given  by 

the  person  from  whom  it  was  received. 
trustee,  n.     one  whose  duty  it  is  to  administer  a  trust. 
turpitude,  n.    baseness. 

U 

ultra  vires,  Lat.  phr.     beyond  the  powers. 

unilateral    (contract),   adj.     a   contract   in  which  the  obligation 

exists  on  one  side  only. 
usury,   n.     agreement   for  a   rate  of   interest  greater  than  that 

allowed  by  law. 
utile  per  inutile  non  vitiatur,  Lat.  phr.     that  which  is  valid  is  not 

rendered  invalid  by  the  incidental  addition  of  invalid  matter. 


valid,  adj.     legally  enforceable. 

validity,  n.     legal  enforceability. 

vendee,  n.     purchaser. 

vendor,  n.     seller. 

vendor's  lien,  n.  phr.     the  right  of  a  seller  to  retain  possession  of 

property  sold  as  security  for  the  payment  of  the  price. 
virtute  officii,  Lat.  phr.     by  virtue  of  his  office.  ' 

vitiate,  v.     to  render  nugatory. 
void,  adj.     having  no  legal  effect. 
voidable,  adj.     potentially  of  no  legal  effect. 
voucher,  n.     receipt  or  release. 

W 

waive,  v.     to  relinquish  a  right  to  enforce. 

warrant,  v.  to  guarantee ;  n.  a  legal  instrument  directed  to  a  per- 
son in  authority  authorizing  him  to  perform  a  certain  act; 
also  a  form  of  receipt. 

watered  stock,  n.  phr.  stock  issued  without  corresponding  in- 
crease of  actual  value. 

writ,  n.  a  precept  in  writing,  issuing  from  a  court  of  justice,  re- 
quiring the  appearance  of  a  party  or  the  doing  of  an  act. 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


AA    000  838  859    7 


